Financial Crisis: And so the economists agree…

A group of economics Nobel Laureates met in Trieste yesterday at the Nobel Colloquia. Their finding on the financial crisis:-

 

(A) new regulatory framework, setting out the principles for future governance of the banking system, would require broad global agreement. It may also need to include restrictions on the activities of commercial banks to discourage them from excessive indulgence in financial innovation.”

 

So the view from the economics academy is pretty resounding. It is interesting to note that their reason for why global agreement is necessary rests on a very familiar concept to international lawyers: Regulatory competition. Robert Solow opined, “international co-operation on future regulation was essential to prevent regulatory arbitrage, whereby banks can exploit differing approaches to regulation in different jurisdictions.”

 

That still does not resolve the question of how to achieve this cooperation. Dennis Snower suggested starting with building international consensus within the G-20 and the G-7’s FSF. This is not new. See Dani Rodrik’s and Daniel Drezner’s views linked on a previous post. (See https://fletcherfila.wordpress.com/2008/11/18/financial-crisis-views-on-the-g-20-communique-and-international-cooperation/)

 

However, the economist’s work is not in vain. At least, we have a pretty credible and cogent view from one sector of the academy. Can it mobilize political will? Maybe it does at the margins. But how about beyond the margins? What’s missing?

 

The FT’s report from the Nobel Colloquia can be found at http://www.ft.com/cms/s/0/3915c2e4-c155-11dd-831e-000077b07658.html.   

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