WHO SHOULD REGULATE FINANCIAL INSTITUTIONS?

Philip Booth

Economic Affairs, 2003, vol. 23, issue 3, 28-34

Abstract: Financial market transactions involve complex decisions and significant amounts of information have to be processed by consumers. Economists often call for statutory regulation to overcome so‐called ‘information asymmetries.’ However, the market will generally develop sophisticated institutions that are able to deal with such problems in financial markets. It is important that regulators do not impede the development of such institutions. The liberal market structure may not look like the market structures in many textbook models of so‐called ‘perfect’ markets. However, the structure may well be efficient and welfare enhancing.

Date: 2003
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