Over at VoxEU.org, the debate on how to save the world continues. One of the best recent commentaries--by which I mean one that I wish I had written--comes from Katharina Pistor. The title says it all: "Reforming the Financial System: Beyond Standardization on “Best Practice” Models."
Most of the current approaches presume that we will have to have more financial regulation at the international level. This in turn presumes that there will be some convergence on what the "right" models of regulation are. As Katharina points out, this is neither necessary nor desirable.
The idea that effective market regulation can be achieved by standardizing rules and regulations on the most successful model at the time is deeply flawed for the following reasons. First, it treats legal institutions as endowments and ignores the need for maintenance and adaptation not only to local conditions, but also to future change. Second, it creates the illusion that a given market is institutionally sound and thereby disguises problems that may trigger future crises.
An alternative strategy to financial market regulation should make room for experimentation:
Experimentation with alternative regulatory approaches is more likely to produce solutions to new problems than standardizing rules on a single, but potentially flawed, model. Assessments of regulatory regimes could follow a “comply or explain” strategy as an alternative to benchmarking. Moreover, policy makers should play a greater role in disseminating alternative models and explaining their trade-offs rather than endorsing a single one.
The big question when you allow countries to adopt different regulatory regimes, and the one Katharina does not tackle, is how you prevent financial institutions from arbitraging these differences away by locating themselves and their activities in jurisdictions that impose the lowest immediate cost on their operations. In other words, can you run such systems without also allowing a certain amount of capital controls? I don't think so.
Hi Prof Rodrik,
And, another consideration is; who do you mitigate risk on malfeasant actors, who are more than willing to change the rules as they see fit--with this new and adaptable/changeable regulatory framework?
The collapse of the current American political system, or, "broken government", is a prime example on how a select few, can act together to stifle progress or engineer rewards for themselves.
This would, I am led to believe, would lead the market towards not only more instability, but also, put more economic power into the hands of politicians in a "broken" American government.
More realistic considerations must be taken into account with her article.
As sad as it sounds, we have to leave the market as it is, in regards to the regulatory framework--it is not inherently broken, but rather, needs an attitude check!
When I say attitude check, the market and guys like Rubin, Madoff and Thain, have to know that 1. Transparency is what matters and 2. We will follow up on theft!
This, is after a model for corporate governance, is, again, revised that makes the new model, force firms into to thinking about the society first and not for them, only, second.
Some call it Socialism, but if you want America to survive, or, any society for that matter, you have to take it serious!
Best,
Youri
http://globalviewtoday.blogspot.com/
Posted by: Youri Kemp | February 03, 2009 at 09:21 AM
Dani:
I would tend to think that Catherine Pister's comments have several other positives.
First, having different regulatory schemas in different countries, as opposed to a regulatory "monoculture" sounds like an excellent way to achieve a more compartmentalized economic structure that is inherently safer. Think of the analogies with natural systems, and how disease can and do run rampant in a monoculture.
Second, it is entirely possible that there exists regulatory schemes that work well only because of local conditions and would be very bad policies for another location. In that case, a consistent regulatory structure might only be able to be consistently BAD.
Third, regarding your concern of someone being able to somehow arbitrage the difference and thereby take advantage of this scheme of "a thousands flowers" of regulation, I suspect that you are right that some form of capital controls are needed but it is entirely possible that the necessary controls are inherent in the market structures that would arise should Catherine's comments be acted upon. The ability to arbitrage depends on some kind of external reference structure and supra-national and very liquid markets they have to be. Compartmentalize the topology, and arbitraging isn't so easy. In theory, one could have arbitraged the different regulatory environments in the 13th century for example, and made handsome profits selling nails in Greenland and Walrus Ivory in England but no one did, did they?
Another note: When Catherine says "The scale of the global crisis and its fallout for people around the globe calls for a new regulatory model. Rather than treating laws and regulations as fixed endowments that incorporate lessons from the past, a process-oriented strategy is needed that emphasizes continuous monitoring and adaptation of regulatory responses to changes in the market place." her reasoning gets just a little slippery--the responsiveness criteria is at odds with the diversification criteria, and present regulations do incorporate important lessons that shouldn't be forgotten (remember Glass-Steagall??I lot of people wish they did!) and therefore I'd say tread lightly with that responsiveness criteria....
Posted by: enigma_foundry | February 03, 2009 at 09:07 PM
Why would some arbitrage between different regulatory systems be worse than the arbitrage against one single regulatory system? It seems that the systemic risk would be smaller.
Posted by: Per Kurowski | February 04, 2009 at 09:03 PM
It is in banks' interest to be associated with strict capital regulation. It helps market credibility, and--best of all--lets the strong bank play Fortinbras, and pick up the kingdom when there is blood on the floor. Ask the shareholders of Chase--proud owners of a cheap Bear Stearns and WaMu.
However, it is not in their managements' interest. A bank can only play Fortinbras once every decade or so: far beyond a typical CEO's tenure. They want quick profit now--best done with lax capital regulation.
This suggests yet another role for compensation regulation. There is much to be said for seven-year restricted stock, vested on the date of CEO retirement.
Posted by: Joe S. | February 05, 2009 at 01:51 PM
Powerleveling-Runescape.net is a professional Runescape powerleveling Service site for Runescape player.You can buy runescape money and cheap runescape gold and rs money service.
Posted by: buy runescape gold | June 15, 2009 at 03:25 AM
The best recommended products for fast penis enlargement methods to get better results with no side effect visit: http://www.pennisenlargementproducts.com
Posted by: penis enlargement | June 26, 2009 at 03:25 AM
An excellent post. You have explained all about cancer in detail. There is nothing left to explain now. Thanks.
Posted by: cheap jordan shoes | July 07, 2009 at 01:55 AM
http://www.link4seo.comI do not know yet. Comparative analysis of the problems of the site, we are effective anti-SEO
Posted by: seo | September 04, 2009 at 02:00 AM
Thanks for the wonderful article. I've learned a lot from you!
Posted by: TV stands | November 10, 2009 at 10:23 AM
Regulatory reform should be simple, and would be, if regulations that were broken were dealt with the measure of swift justice!
Posted by: united states bankruptcy court | November 24, 2009 at 04:20 PM
Experimental regulation sounds nice in theory, but hard in practice. One would have to set up a quantifiers and metrics, which itself would be a chore to define properly.
Posted by: how to flirt | November 30, 2009 at 10:35 PM
In a primitive political system, power is transmitted through violence, or the threat of violence: military coups, private militias, and so on. In a less primitive system more typical of emerging markets, power is transmitted via money: bribes, kickbacks, and offshore bank accounts. Although lobbying and campaign contributions certainly play major roles in the American political system, old-fashioned corruption—envelopes stuffed with $100 bills—is probably a sideshow today, Jack Abramoff notwithstanding.
http://www.watchgy.com/
http://www.watchgy.com/tag-heuer-c-24.html
http://www.watchgy.com/rolex-submariner-c-8.html
Posted by: rolex gmt watches | December 23, 2009 at 02:47 AM
Nike Shox|Nike Shox Sale is special for you with a very pretty design
Posted by: nike shox sale | January 09, 2010 at 04:14 AM
Don't waste your time on a man/woman, who isn't willing to waste their time on you.
Posted by: Ugg london | January 11, 2010 at 09:32 PM
CHI flat iron by Farouk system. Direct from the manufacturer, this genuine Chi ceramic iron comes with valid, one year warranty!
Posted by: chi flat iron | January 14, 2010 at 04:02 AM
great ,I like it
Posted by: chi hair straightener | January 19, 2010 at 01:08 AM
Very interesting and informative post. I agree that the most effective market regulation must be modulated in very good, precise form. I agree with you and with your commentators, thanks for the post.
Posted by: Vintage Rings | January 28, 2010 at 02:28 PM
Great post about reform
Posted by: Sony Vegas Pro 8.0 OEM | February 01, 2010 at 01:30 PM
This is clearly replica watches the job for our legal fraternity to engage the establishment to necessary breitling watches steps by filing petitions in various courts. IF one fails another should be cartier watches filed taking every one to task. It is rolex watches useless to suggest ways and means to solve tag heuer watches the day to day problem to well paid employees tissot watches of government controlled establishments. Only active omega watches judiciary will resolve this problem.
http://www.watchvisa.com
http://www.watchvisa.com/breitling-watches.html
http://www.watchvisa.com/cartier-watches.html
Posted by: rolex watches | February 25, 2010 at 10:07 PM
This is clearly replica watches the job for our legal fraternity to engage the establishment to necessary breitling watches steps by filing petitions in various courts. IF one fails another should be cartier watches filed taking every one to task. It is rolex watches useless to suggest ways and means to solve tag heuer watches the day to day problem to well paid employees tissot watches of government controlled establishments. Only active omega watches judiciary will resolve this problem.
http://www.watchvisa.com
http://www.watchvisa.com/breitling-watches.html
http://www.watchvisa.com/cartier-watches.html
Posted by: rolex watches | February 25, 2010 at 10:55 PM
Why is everyone just montblanc watches willing to accept power cuts? Don't you think that patek philippe watches having continious power is your right? If people aren't going to demand rado watches 24X7 power, don't expect anything zenith watches to change. The government needs to look at other sources parmigiani watches of power generation. The only solution is more power panerai watches production. Nothing less.
http://www.watchvisa.com/montblanc-watches.html
http://www.watchvisa.com/patek_philippe-watches.html
http://www.watchvisa.com/rado-watches.html
http://www.watchvisa.com/tudor-watches.html
Posted by: rado watches | February 26, 2010 at 12:03 AM
They should take up building BVLGARI Watches dams for power generation. We should FRANCK MULLER watches learn from china. They have the world's largest dam for power CHANEL Watches production, it alone produces 22,000 MW of LONGINES Watch power. So, unless the government opens up the economy more for iwc watches foreign investors, this power cut problem is a life long disease every hublot-watches india will need to face.
http://www.watchvisa.com/bvlgari-watches.html
http://www.watchvisa.com/chanel-watches.html
http://www.watchvisa.com/franck_muller-watches.html
Posted by: bvlgari watches | February 26, 2010 at 01:37 AM
Very interesting and informative post. I agree that the most effective market regulation must be modulated in very good, precise form. I agree with you and with your commentators, thanks for the post.
Posted by: air jordan 2010 Varsity Red | March 16, 2010 at 09:55 AM
Experimental regulation sounds nice in theory, but hard in practice. One would have to set up a quantifiers and metrics, which itself would be a chore to define properly.
Posted by: Supra TK Society High | March 22, 2010 at 06:45 AM
It is in banks' interest to be associated with strict capital regulation. It helps market credibility, and--best of all--lets the strong bank play Fortinbras, and pick up the kingdom when there is blood on the floor. Ask the shareholders of Chase--proud owners of a cheap Bear Stearns and WaMu.
anti-shoe
Posted by: MBT shoes | March 25, 2010 at 02:59 AM
http://airmax-shoe.com/nike-rift-c-14.htmlIt is in banks' interest to be associated with strict capital regulation. It helps market credibility, and--best of all--lets the strong bank play Fortinbras, and pick up the kingdom when there is blood on the floor.
Posted by: nike Rift | March 25, 2010 at 03:08 AM
东方饭店是、
Posted by: 密集柜 | March 26, 2010 at 01:00 AM
http://www.sousoushoes.com I agree with this post. Hope this will have a positive change.http://www.tootoospace.com
Posted by: sousoushoes | April 06, 2010 at 04:53 AM
http://www.air-max-chaussures.com
http://www.air-max-schuhe.com
Posted by: air max chaussures | April 11, 2010 at 05:18 AM
GHD straighteners was kmown as ghd flat iron, which was authorized online seller provides all kinds of hair straighteners,pink ghd,purple ghd,babyliss. By visiting ghd australia , you will find what you want and made yourself more beautiful.If you miss it ,you miss beauty.Buy a piece of ghd for yourself.Come and join us http://www.ghdoutlet-au.com/ to win the ghd iv styler.
Posted by: ghd straighteners | April 21, 2010 at 10:42 PM
Thank you for introducing me the useful information.And .....Totally boring. can you tell me where is the red and gold colors...? I predict a very low seller....I look forward your answer.thank you!
Posted by: mbt chapa shoes | May 05, 2010 at 08:39 PM
Birkenstock was Made in Germany since 1774 . Check out our Birkenstock sandals and Birkenstock shoes including the Birkenstock gizeh,at the lowest regular outlet prices, free shipping and when you put on Birkenstocks. you will feel very comfortable.
Posted by: birkenstock | May 05, 2010 at 10:53 PM
you may have got a piont of there, but I will still keep up my mind. how do you think about gucci outlet|gucci sneakers|gucci handbags sale on tiffany jewelry|links of london|tiffany jewelry sale| as well as gucci men shoes|women gucci handbags|women gucci boots? jcgsak
Posted by: gucci outlet | May 07, 2010 at 03:51 AM
Potent http://www.p90xmall.com combination of pressing, curling, and fly movements, that will leave you stronger. http://www.p90xmall.com
Posted by: p90x workout | May 14, 2010 at 01:32 AM
ngontrols are needed but it is entirely possible that the necessary controls are in
Posted by: cheap coach handbags | June 05, 2010 at 03:01 PM
We A professional manufacturer
Making lug nuts ,
wheel studs,
wheel bolt,
http://www.777hardware.com ,titanium lug nuts,
we have developed thousands of wheel lock bolts and wheel lock nuts, which are almost available for all kinds of cars
Posted by: lug nuts | June 10, 2010 at 01:32 AM
There were timberland 6 inch sensitivity and a beauty to her that have nothing to do with timberland 6 inch boots looks. She was one to be listened to, whose words were so easy to take to timberland boots sale heart.I used to find notes left in the collection basket, beautiful timberland boots outlet notes about my homilies and about the writer's black timberland boots thoughts on the daily scriptural readings. The person who penned the notes mens timberland boots would add reflections to my thoughts and would always include some timberland pro boots quotes from poets and mystics he or she had white timberland boots read and remembered and loved. The notes fascinated black timberland shoes uk me. Here was someone immersed in a search for truth and beauty. Words had been cheap timberland boots treasured, words that were beautiful. And I felt as if the words timberland waterproof boots somehow delighted in being discovered, for they were obviously very generous to the as yet anonymous timberland work boots writer of the notes. And now this person was in turn learning the secret of sharing them. Beauty so shines when given away. The only truth that exists timberland hiking boots is, in that sense, free. http://www.timberland6inch.com/
Posted by: timberland 6 inch | July 16, 2010 at 08:14 AM
Extremely great post, really beneficial stuff. Never thought I’d find the facts I would like in this article. I’ve been looking all over the net for some time now and was starting to get irritated. Thankfully, I stumbled onto your website and received exactly what I was looking for.
Posted by: authentic jordans | August 24, 2010 at 01:54 AM
Extremely great post, really beneficial stuff. Never thought I’d find the facts I would like in this article. I’ve been looking all over the net for some time now and was starting to get irritated. Thankfully, I stumbled onto your website and received exactly what I was looking for.
Posted by: authentic jordans | August 24, 2010 at 01:56 AM
a story
Posted by: ugg outlet | September 09, 2010 at 08:32 PM
i agree with you!your sayiing is right!
Posted by: ugg boots uk | September 13, 2010 at 03:47 AM
I love your post, thank you for sharing.
Posted by: thomas sabo | October 29, 2010 at 03:59 AM
prestazioni e affidabilità. Nel corso degli anni orologi Bell & Ross sono stati sottoposti a vari R4i SDHC
nintendo r4
progressi tecnologici che hanno migliorato la loro funzionalità e precisione. Tuttavia, la raccolta firma originale di cellulari cect
cellulari dual sim orologi Bell & Ross è estremamente costoso per la gente comune. Non farti deluso in quanto vi sono diversi replica Bell & Ross orologi disponibili sul mercato. orologi imitazioni
orologi zenith
Anche se, tutti questi negozi non sono affidabili, ci sono alcuni tra quelli che reputati
Posted by: micro sd | October 30, 2010 at 03:40 AM
I really enjoyed this too!
Posted by: pandora-bracelets-australia | November 13, 2010 at 02:11 AM
raf
Thanks.
Posted by: Account Deleted | January 19, 2011 at 06:19 AM
http://www.ghdstyle-au.com/ghds.html
http://www.chihairflatirons.us
http://www.ghdsoutlet.com
http://www.googleghdhair.com
Posted by: Account Deleted | May 04, 2011 at 10:22 PM
celikraf
celikraf
Thanks a lot ...
Posted by: Account Deleted | May 28, 2011 at 08:42 AM
well worth the read.I found it very informative as I have been researching a lot lately on practical matters such as you talk about...
">http://www.stayingeneva.com"> Geneva Hotels
Posted by: Account Deleted | June 05, 2011 at 05:41 AM
well worth the read.I found it very informative as I have been researching a lot lately on practical matters such as you talk about... Geneva Hotels
Posted by: Account Deleted | June 05, 2011 at 05:55 AM
Raf
raf
Thanks to you ..
Posted by: Account Deleted | June 06, 2011 at 01:29 PM
Raf
raf
Thanks for comment ...
Posted by: Account Deleted | June 11, 2011 at 12:46 PM
Many places and centers offer business and trade promotions to both buyers and supplier.What about the differences in skill intensities across industries? The job losses in the relatively unskilled-labor intensive battery industry should have little effect on the relatively skilled-labor intensive machinery
sexshop
sexyshop
sexshop online
alongador peniano
Posted by: Account Deleted | July 21, 2011 at 07:34 PM
This site is excellent and so is how the subject matter was explained. I also like some of the comments too.Waiting for next post.
organic seo service
Posted by: Account Deleted | October 13, 2011 at 11:51 AM
Awesome, Very interesting issue that after a very successful. Nicely written article good work ! Thanks for the great piece of sharing. Enjoy to read your write . Thanks a lot
Creating History Together With ArenaBetting Piala Eropa 2012 http://seotoolinfo.com/2012/06/creating-history-creating-history-together-with-arenabetting-piala-eropa-2012/
Agenliga Sebagai Agen Bola Online Untuk Euro 2012 http://seotoolinfo.com/2012/06/agenliga-agenliga-com-sebagai-agen-bola-online-untuk-euro-2012/
Posted by: Account Deleted | June 30, 2012 at 01:55 PM
we help fill the gap between the entrepreneurial spirit of Pakistani businessmen and the prevailing global environment.
online home shopping
Online Shopping Karachi
Posted by: Account Deleted | July 13, 2012 at 10:04 AM
Good post!Thank you for sharing.
Ultrabook Parts|AU AC Adapters|Global AC Adapter|Ersatz Laptop Akkus
Posted by: Kinsell Emma | March 06, 2013 at 12:57 AM