Abstract
There Is More to It Than the Repeal of Glass-Steagall: Drifting, Micro, and Information-Based Financial Regulation
The transformation of the American regulatory approach was informed by theories put forward by economists like Stigler, Buchanan, and Niskanen in the 1970s, who problematized regulatory capture, rent-seeking, and bureaucratic inefficiencies, as the first lecture highlights. As the proponents of these theories assumed roles in the highest echelons of American bureaucracy, the government's approach to risk regulation shifted from direct and substantive oversight towards promoting private risk regulation based on market discipline and individual rationality. Further instrumental in this transformation was the ascendance of financial economics in the 1990s. While much of the neoliberalism literature focuses narrowly on deregulation as the main policy face of this paradigmatic change, the resulting transformation in the policy landscape was actually much more multifaceted. I discuss in this lecture how regulatory drift and the ascendance of micro-oriented and information-based approaches to risk regulation were as consequential as deregulation, if not more so, in terms of the way government tackled financial markets, systemic risk, and consumer financial protection.
