IDEAS home Printed from https://ideas.repec.org/a/wly/reggov/v4y2010i1p3-21.html
   My bibliography  Save this article

Optimization and its discontents in regulatory design: Bank regulation as an example

Author

Listed:
  • William H. Simon

Abstract

Economists and lawyers trained in economics tend to speak about regulation from a perspective organized around the basic norm of optimization. In contrast, an important managerial literature espouses a perspective organized around the basic norm of reliability. The perspectives are not logically inconsistent, but the economist's view sometimes leads in practice to a preoccupation with decisional simplicity and cost minimization at the expense of complex judgment and learning. Drawing on a literature often ignored by economists and lawyers, I elaborate the contrast between the optimization and reliability perspectives. I then show how the contrast illuminates current discussions of the reform of bank regulation.

Suggested Citation

  • William H. Simon, 2010. "Optimization and its discontents in regulatory design: Bank regulation as an example," Regulation & Governance, John Wiley & Sons, vol. 4(1), pages 3-21, March.
    • Handle: RePEc:wly:reggov:v:4:y:2010:i:1:p:3-21
    DOI: 10.1111/j.1748-5991.2010.01069.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1748-5991.2010.01069.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1748-5991.2010.01069.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Sunstein,Cass R., 2002. "Risk and Reason," Cambridge Books, Cambridge University Press, number 9780521791991, September.
    2. Peter Mooslechner & Helene Schuberth & Beat Weber (ed.), 2006. "The Political Economy of Financial Market Regulation," Books, Edward Elgar Publishing, number 3947.
    3. Tarullo, Daniel, 2008. "Banking on Basel: The Future of International Financial Regulation," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 4235, April.
    4. Alan Greenspan, 1998. "The role of capital in optimal banking supervision and regulation," Economic Policy Review, Federal Reserve Bank of New York, vol. 4(Oct), pages 163-168.
    5. Richard Parker, "undated". "Grading the Government," University of Connecticut School of Law Working Papers uconn_ucwps-1000, University of Connecticut School of Law.
    6. Parker,Christine, 2002. "The Open Corporation," Cambridge Books, Cambridge University Press, number 9780521818902, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abdulrahman Alrabiah & Steve Drew, 2022. "A framework for managing regulatory policy life-cycle challenges: an empirical design," Journal of Banking Regulation, Palgrave Macmillan, vol. 23(2), pages 210-223, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Augusto De La Torre & Alain Ize, 2010. "Regulatory Reform: Integrating Paradigms," International Finance, Wiley Blackwell, vol. 13(1), pages 109-139, March.
    2. Helleiner, Eric & Pagliari, Stefano, 2011. "The End of an Era in International Financial Regulation? A Postcrisis Research Agenda," International Organization, Cambridge University Press, vol. 65(1), pages 169-200, January.
    3. Robert Hahn & Caroline Cecot, 2007. "The economic significance of “insignificant” rules," Regulation & Governance, John Wiley & Sons, vol. 1(2), pages 172-182, June.
    4. Hsueh, Che-Fu, 2014. "Improving corporate social responsibility in a supply chain through a new revenue sharing contract," International Journal of Production Economics, Elsevier, vol. 151(C), pages 214-222.
    5. Joseph G. Haubrich, 2020. "A Brief History of Bank Capital Requirements in the United States," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2020(05), pages 1-6, February.
    6. Elisabetta Montanaro, 2013. "Regole di Basilea e modelli di vigilanza: quale convergenza? (Basel rules and supervisory models: What convergence?)," Moneta e Credito, Economia civile, vol. 66(264), pages 415-442.
    7. Donald Macrae, 2011. "Standards for risk assessment of standards: how the international community is starting to address the risk of the wrong standards," Journal of Risk Research, Taylor & Francis Journals, vol. 14(8), pages 933-942, September.
    8. Neelke Doorn, 2015. "The Blind Spot in Risk Ethics: Managing Natural Hazards," Risk Analysis, John Wiley & Sons, vol. 35(3), pages 354-360, March.
    9. Gowthorp, Lisa & Greenhow, Annette & O’Brien, Danny, 2016. "An interdisciplinary approach in identifying the legitimate regulator of anti-doping in sport: The case of the Australian Football League," Sport Management Review, Elsevier, vol. 19(1), pages 48-60.
    10. Jane D'Arista, 1998. "Financial Regulation in a Liberalized Global Environment," SCEPA working paper series. 1998-07, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    11. Christian Thimann, 2015. "The Economics of Insurance, its Borders with Finance and Implications for Systemic Regulation," CESifo Working Paper Series 5207, CESifo.
    12. Brent Ambrose & Michael LaCour-Little & Anthony Sanders, 2005. "Does Regulatory Capital Arbitrage, Reputation, or Asymmetric Information Drive Securitization?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 28(1), pages 113-133, October.
    13. Chavez-Demoulin, V. & Embrechts, P. & Sardy, S., 2014. "Extreme-quantile tracking for financial time series," Journal of Econometrics, Elsevier, vol. 181(1), pages 44-52.
    14. Friehe, Tim & Langlais, Eric, 2015. "On the political economy of public safety investments," International Review of Law and Economics, Elsevier, vol. 41(C), pages 7-16.
    15. Tian Sang & Peng Liu & Liang Zhao, 2022. "Judicial Response to Ecological Environment Risk in China—From the Perspective of Social Systems Theory," IJERPH, MDPI, vol. 19(21), pages 1-13, November.
    16. Julia Black & Robert Baldwin, 2012. "When risk‐based regulation aims low: Approaches and challenges," Regulation & Governance, John Wiley & Sons, vol. 6(1), pages 2-22, March.
    17. D. M. Nachane & Saibal Ghosh, 2004. "Credit Rating And Bank Behaviour In India: Possible Implications Of The New Basel Accord," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 49(01), pages 37-54.
    18. Estrella, Arturo, 2004. "The cyclical behavior of optimal bank capital," Journal of Banking & Finance, Elsevier, vol. 28(6), pages 1469-1498, June.
    19. Bärbel R. Dorbeck‐Jung & Mirjan J. Oude Vrielink & Jordy F. Gosselt & Joris J. Van Hoof & Menno D. T. De Jong, 2010. "Contested hybridization of regulation: Failure of the Dutch regulatory system to protect minors from harmful media," Regulation & Governance, John Wiley & Sons, vol. 4(2), pages 154-174, June.
    20. Marco Migueis, 2017. "Forward-looking and Incentive-compatible Operational Risk Capital Framework," Finance and Economics Discussion Series 2017-087, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:reggov:v:4:y:2010:i:1:p:3-21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1748-5991 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.