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

William H. Simon

Regulation & Governance, 2010, vol. 4, issue 1, 3-21

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.

Date: 2010
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https://doi.org/10.1111/j.1748-5991.2010.01069.x

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Persistent link: https://EconPapers.repec.org/RePEc:wly:reggov:v:4:y:2010:i:1:p:3-21

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