Collective Action and the Institutionalist Approach to Financial Regulation

Faruk Ülgen

Journal of Economic Issues, 2018, vol. 52, issue 2, 541-549

Abstract: Drawing on the institutionalist approach to a capitalist economy as a money economy, I regard financial regulation and supervision as a collective action problem. I argue that, given the basic characteristics of such an economy, a financial system may be considered as a public utility and financial stability as a public good. I then maintain that the provision of the latter could not rely on private market mechanisms, such as self-regulation and price-directed incentives. As capitalism develops through more financialized forms, new institutions and regulatory rules must be designed to reframe the market’s boundaries in order to consolidate systemic stability, which is a basic condition for continuous and sustainable economic relations in society. I then suggest a precautionary-principle-based macro-prudential approach to financial regulation in order to ensure a sustainable provision of finance and financial stability that is consistent with the characteristics of a money economy.

Date: 2018
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Working Paper: Collective action and the institutionalist approach to financial regulation (2018)
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DOI: 10.1080/00213624.2018.1469934

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