Home > Uncategorized > Economic policy — a political matter

Economic policy — a political matter

from Lars Syll 

toozeWhat kind of financial system do we want? What function should it have? What kind of financial activity do we want to permit or even encourage? These are essential questions for the shaping of economic and social policy at a national and global level. If we leave these questions up to the private sector, we expose ourselves to enormous risks. On the basis of our experience of 2008, we know how to master a massive heart attack in the banking system. But we also know how high the costs of such an intervention are.

The chance for structural reform was missed in 2008 … What we must aim to do is tighten regulations, further raise capital requirements and bolster liquidity buffers to minimize the risk of a bank run. Furthermore, we must extend regulation to non-banks, such as the major asset managers. These are technical matters, but as the fate of Dodd-Frank shows, they cannot be separated from politics … The endless bickering over technicalities is the opposite of what we need: namely a real and powerful banking supervision that does not shy away from fundamental questions and public debate.

Unfortunately, no one with political authority on either side of the Atlantic seems prepared to pose these questions, let alone to take action. After 2008, we know what that means. When things get serious, we are all on the hook.

Adam Tooze

  1. September 11, 2018 at 2:34 am

    I personally want a financial system that accounts for every product cost and ensures funds are available to upgrade what is worthy and uplift those who need schools and study lamps.

    September 11, 2018 at 6:24 pm

    The public choice or constitutional Economics research program allows us to frame the above discussion as follows:

    If you think on two way of reasoning:

    Causation A: *Given* the rules of the policy game what the economic policies and their macro results do they imply?

    Causation B (*constitutional design*): *Given* a mix of economic policies and their macro results (*the ones we wish to attend*) what configuration of the rules of the policy game do it imply?

    Your first 2 questions are located in the Causation B.

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