Some regulatory lessons to be drawn from the financial crisis |
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Authors: | Luigi Prosperetti |
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Institution: | (1) Faculty of Law, University of Milano, Milan, Italy |
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Abstract: | The article briefly outlines how the two major structural causes of the financial crisis have been a massive underestimation
of the negative externalities potentially arising from malfunctioning of financial markets, and the policy decision to assign
the production of an eminently public good, financial stability, to private parties. Both ideas have been a tenet of the so-called
Greenspan doctrine. The crisis also shows that all regulators tend to be captured in the end, and thus any new legislation
should contain bright-line rules, that might look inefficient when assessed with reference to the market they regulate, but
are socially efficient, because it would be politically costly to alter them. Criminal sanctions, which after all are a social
form of regulation, should also be strengthened.
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Keywords: | JEL Classification" target="_blank">JEL Classification L 51 G 38 |
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