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Private regulation versus government regulation: The example of financial markets

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  • Philip Booth

Abstract

Economists generally study financial regulation in a ‘market failure’ context. Market failures, as defined in undergraduate textbooks, are identified and government action is proposed to remedy those failures. Quite apart from objections to the market‐failure model that can come from many perspectives, this approach ignores the ways in which regulatory institutions can develop within financial markets. Indeed, such institutions were the norm in the UK until the mid‐1980s, and they still exist today. This article proposes that economists should take this observed reality into account. When considering the appropriateness of government intervention, they should first study the relative advantages and disadvantages of private and government regulation.

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  • Philip Booth, 2022. "Private regulation versus government regulation: The example of financial markets," Economic Affairs, Wiley Blackwell, vol. 42(1), pages 30-49, February.
    • Handle: RePEc:bla:ecaffa:v:42:y:2022:i:1:p:30-49
    DOI: 10.1111/ecaf.12512
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    References listed on IDEAS

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    1. Elinor Ostrom, 2010. "Beyond Markets and States: Polycentric Governance of Complex Economic Systems," American Economic Review, American Economic Association, vol. 100(3), pages 641-672, June.
    2. Stringham, Edward Peter, 2015. "Private Governance: Creating Order in Economic and Social Life," OUP Catalogue, Oxford University Press, number 9780199365166.
    3. Bellis, C.S., 2000. "Professions in Society," British Actuarial Journal, Cambridge University Press, vol. 6(2), pages 317-364, August.
    4. Ryan Bourne, 2019. "‘Market failure’ arguments are a poor guide to policy," Economic Affairs, Wiley Blackwell, vol. 39(2), pages 170-183, June.
    5. Booth, P.M., 1997. "The Political Economy of Regulation," British Actuarial Journal, Cambridge University Press, vol. 3(3), pages 675-707, August.
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