May 1, 2013
by Annelise Riles

“New Governance” and Global Financial Regulation

In its latest newsletter, the Tobin Project covered the online publication of my recent working paper in which I examine the relevance of “New Governance” regulatory theory to the challenges faced by the Financial Stability board in regulating systematically important financial institutions.

Tobin Project Newsletter

Direct link to my working paper: Is New Governance the Ideal Architecture for Global Financial Regulation?

October 2, 2012
by Annelise Riles

Market Totalitarianism

AIG Tower, Seoul

One of the big financial news stories of the week was that the US government will get its money back on the sale of AIG stocks. There is actually a debate about whether this is an accurate description of the state of affairs. But what interests me most is the fact–apparently agreed upon by both the champions and the critics of the TARP program–that the government’s return on its investment is the arbiter of the success or failure of the TARP policy. The state is now an investor, and its success or failure is evaluated according to the terms we apply to any other investor. What model of the state is this?
What fascinates me about this is that the state is a player in the market, to be evaluated on pretty much the same terms as we would evaluate any other market participant. This is a new kind of politics, not just a new kind of regulatory economics.
So what? I think this is actually a very big deal–something that should get political theorists going, and should engage us all in debates about the nature of democracy, or perhaps post-democracy, in an era in which states have imploded into markets and vice versa. I have a new paper coming out next spring on this subject in American Anthropologist and the title gives away my own views on this emerging politics: Market Totalitarianism.
I presented this paper last week as a keynote lecture at a conference at McGill Law Faculty entitled “Law Beyond the State.” A smattering of responses I got:

“You’re crazy.”
“You’re wild.”
“I wouldn’t be so radical.”
“People love what you do but they wouldn’t follow you there themselves.”
‘Your paper did not leave anyone indifferent…These slightly surreal moments are one of the great blessings of life.”
And weirdest of all, “Listening to you is an aesthetic experience.”

But that isn’t the worst: One of my own colleagues at an internal faculty workshop told me I should “just go hang out in the Hamptons with Romney and the other crazies.”
It is a sad commentary on how truly boring the legal academy has become when I count as outrageous. What seems to bother people are two things:

1. I am suggesting that there might actually be unintended consequences to centrist lefties’ eternal defense of the state (nothing new I thought here–see Todorov, Lefort, and any of the leftists with experiences of totalitarian states under their belts) and

2. I am suggesting that the techniques of private law, which we have devoted generations to showing up as endlessly malleable, and worse, politically suspect, might offer an ironic space for creative response to the current condition. Here is a very thoughtful version of the latter point:

“I found your diagnosis of the market and debt most compelling and was drawn to your use of Mauss and Davy. What I found surprising — and I suppose that is the Davy direction rather than the Mauss direction of your analysis — is that you ended up hitching your flag to the mast of the reciprocity of the contractual form (sounding remarkably like Ernie Weinrib in the end) rather than revisiting more insistently the gift relationship. In other words, I was expecting you to tell us that, in effect, capitalism had collapsed upon itself through the involution of debt that you described …and that the sphere of gift, relegated to the margins by market exchange, would have to be reinvested.”

That is indeed what one would expect of an anthropologist! Arguing for gifts instead of law.  What I find challenging about Georges Davy is that he refuses the distinction between the two.

January 25, 2012
by Annelise Riles

What is the key debate in financial regulation now?

Most of the chatter about financial regulation in the blogosphere focuses on the issues of the moment. But what are the big questions? What does all the debate about the detail add up to?

To me, the big question is this: What comes after the collapse of the neoliberal consensus? What will be the prevailing common understanding of the proper relationship between governments and markets, and between actors in the market (financial entities, labor, enterprises, and yes, the academy?)

This question has so many dimensions, but it is the big challenge of our day, and most of the fights on the front page of the Financial Times–whether it is about disclosure policy at the Fed or what kind of collateral the ECB should accept–come down to versions of this Big Question.

Here are some possible subparts to this question:

-Is New Governance (peer review, self monitoring, naming and shaming, soft law etc) as now practiced at key international financial organizations such as the Financial Stability Board the answer?

-How do we balance democratic participation with the need for expertise? Can these things be “balanced”? What other models might we have of how democracy and expertise can coexist?

-What new forms of collaboration between the government and the market might be possible?

What do you think is the key question? What do you think about these questions?


January 9, 2012
by Annelise Riles
1 Comment

Broadening the field of financial regulation

Stock DataThis morning I participated in a fantastic panel at the American Association of Law Schools organized by Anna Gelpern and Eric Gerding on the state of legal scholarship about financial institutions. The question the organizers asked is, what is the most pressing focus for the field today?
I argued that we need to significantly broaden the field–its subject, its methods, and the range of debates it is addressing at the moment.


In this post, I will focus on Broadening the Subject:
  • Research needs to become far more seriously comparative. Dodd Frank is not the only thing happening in the world, people!  Elsewhere, very different solutions, different models of market regulation are being developed–and indeed there are different views of what the key problems are.  American scholars pay lip service to the globalization of financial regulation but too often focus only on US and UK law and assume that issues elsewhere are either pretty much the same, or just behind the US and the UK in development. But the days of US and UK dominance are soon over.  The world is far more complicated and more interesting than this.
  • Research needs to become far more focused on international regulatory problems.  Most regulatory problems are now cross-jurisdictional in some sense or another.  This means that new international regulatory projects–from the Financial Stability Board to efforts to coordinate countries excluded from the Basel consensus–are increasingly important.  Yet how much do most scholars in the field of financial regulation know about international law and institutions? Too often we seem to be reinventing the wheel in that field, without taking advantage of the wealth of knowledge about what works and doesn’t work in international institutions in analogous fields. (Stay tuned for my forthcoming paper on this)
  • We need to pay more attention to forms of regulation outside the purview of traditional state institutions.  As I argue in Collateral Knowledge, most market governance is not state-based. It is initiated and conducted by private parties.  How does this work? When does it work and when does it not? How does it interact with state regulation?
  • We need to focus much more on the politics of market regulation–on the changing political climate in which financial regulation is being produced, the differences in this climate in different jurisdictions, and its impact on the policy options available to regulators, the culture/esprit de corps among regulators, the ability to recruit top talent to the bureaucracy, and indeed the zone of what regulators imagine as possible.  Just as internationalizing the field demands reaching out to international law scholars, politicizing the field means reaching out to political scientists and scholars of law and politics working in other domains of law.
  • We need to pay attention to the ways in which the field of finance is always expanding to include other subjects. For example, markets in energy products bring finance into conversation with environmental law and politics, and financial crises and environmental crises mutually influence each other in many ways.
Tomorrow I will take up how we might broaden the methods we use to study financial regulation and what debates deserve our central attention.

July 7, 2011
by Annelise Riles

Learning from Regulatory Diversity

As we look ahead toward how we can do a better job of preventing, or at least lessening the effects of the next financial crisis, I think we can all agree that the more information regulators have about the real world conditions in the market–the nature of the products, the institutional contexts in which business decisions are being made, and the character of the risks–the better.  The question is, what is the best way for regulators to get such information?

One of the big Ahas of my current research at the Bank of Japan is that different regulatory systems, or cultures, may have different approaches to getting such information.  In the United States and in the UK, there is a big emphasis on hiring regulators with practical market experience.  US and UK regulators know that such individuals can be invaluable because they understand the thinking of market insiders.  Ironically, such individuals often turn out to be the toughest regulators of all as they are least likely to be snowed by bogus excuses about the impossibility of implementation of a certain reform, or the unavailability of a certain kind of information.  Think Gary Gensler, former Goldman Sachs executive now head of the Commodity Futures Trading Commission for example.

There is no doubt that this kind of talent is one important route to information.  Japanese regulatory institutions have relatively few such people, and in my interviews some Japanese regulators have suggested that it would be helpful to have more.

But Japanese regulators have a different approach: they maintain much more intensive, almost real-time contacts with their counterparts in the industry.  For example, a junior regulator may have his counterpart in a given bank on the phone two or three times a day.  In addition there are yearly on-site inspections that last several weeks and provide mini “fieldwork” opportunities for regulators to sit on the inside, as well as multiple “targeted inspections” also on-site.  There are daily or weekly contacts at every level of the bank and government, too, from the most junior to the most senior, since one gets a different picture of what is going on inside a financial institution depending on who one talks to.

One advantage of this approach is that in a world in which market realities change very quickly the regulator’s information is very current.  In contrast one problem with the US-UK approach is that after only a few years in government, a former banker’s experience quickly becomes relatively obsolete.

Perhaps here regulatory theory could benefit from the insights of the field of comparative law. Comparative lawyers know that it is pointless to argue about which system in the world is “best” in some absolute sense. French law and American law each have their relative strengths and weaknesses, but more importantly reflect an adaptation to the wider culture and values of the societies out of which they emerge.  Studying these differences can sometimes provide insights for reform (a French court may wish to borrow some precedent from an American court or vice versa) and can also help sharpen, through the contrast, each side’s appreciation of what they value the most. In much the same way, regulatory cultures are different, and interesting in their differences.  Perhaps rather than throw all our energies into defining one global regulatory approach or standard, we could start by noticing these differences, describing them, and analyzing their relative strengths and weaknesses as well as their cultural sources and purposes within each institutional and economic context.

June 14, 2011
by Annelise Riles

A Japanese Perspective on American Markets

There is an old stereotype of Asian markets that goes like this: Asians don’t really have capitalism, they have relational capitalism. Relationships are what matter first in Asia.  And then the standard critique follows: and that is why their  markets are inefficient, because they care too much about relationships.

In this light, I found the following observation by a Japanese lawyer over dinner the other night about what is wrong with US markets deliciously challenging to the standard dogma: Why, he asked me, when Americans meet in the market, do they insist on pretending they are friends? “When I hire a taxi to take me from point A to point B,” he said, “it is because I want a ride, not a conversation.  Why do I have to engage in the farce that what I am really after is a chat about the weather with the driver? Or when I go to get my haircut, it is because I actually want a haircut.  Or if I want to buy a sandwich, it is because I am hungry, not because I want to make friends with the waitress.  I talk all day long for a living, and yet I find that in America in addition to paying a fee you get charged another kind of charge–you have to do the work of making small talk too.”

He has a point–we Americans seem to need to dress up our capitalism as if it were relational capitalism.  In Japan, at least, in contrast, when you pay for a service, you don’t have to pretend the seller of the service is your new best friend.

June 3, 2011
by Annelise Riles

An Episode in Japanese Markets

Yesterday I had an adventure that exemplifies some of the enduringly unique aspects of the Japanese market.
I left my office at 5:30 pm and took the thirty minute subway ride to Aoyama for my evening dinner appointment.  I arrived in Aoyama thirty minutes early and so settled into a cafe with a cappuccino to pass the time. Thirty minutes later I went to pay, intending to scoot right on to dinner.  That is when I discovered that I had left my wallet at the office.
First, I need to explain how this mistake was even possible. After all, in New York or Paris, without a wallet you wouldn’t get far.  But in Japan, virtually all transportation costs, from the subway to trains to buses and taxis, are settled through an electronic card called a PASMO.  You can pay for all kinds of other things with PASMO too such as purchases at convenience stores. It is a very advanced system backed by a legal and technological infrastructure that is years ahead of anything in the US now. But unfortunately for me my PASMO was not accepted at the coffee shop nor at the restaurant where I was heading.

So what to do? I summoned the waiter and apologetically explained my predicament. I expected a furious response but he showed not even a hint of concern or annoyance.  Just pay me later, he said. Can you imagine a New York waiter having that kind of trusting and generous reaction when faced with a customer he or she had never seen before? I gave him my business card and left.

I phoned my business dinner appointment and again profusely apologized for the fact that I was going to have to borrow money from him despite the fact that I was due to be the host. No problem he said. He had the equivalent of $600 in cash with him so he could cover it. Not a credit card, but a huge amount of cash was going to solve the problem. This was possible because Tokyo is relatively safe enough from theft that people don’t worry about carrying around that much cash. And so my friend’s usage of cash also reflects the weak power of credit card companies over consumers relative to the United States.  If you pay cash you don’t have the temptation to go into debt over ordinary indulgences.

When my colleague arrived for dinner he joked, “but is your wallet safe on your desk?” I realize it doesn’t sound like a joke at all to American ears.  On the contrary, if I were in New York or even in Ithaca this concern would have been a serious part of the dilemma I was facing. Would my wallet still be sitting on my desk in the morning when I went to retrieve it?  But we both understood that this was not something I even needed to worry about. As we finished dinner I borrowed some more cash from him and we stopped by at the cafe to pay my bill from earlier in the evening. The waiter wasn’t the least bit surprised to see me, and gave me back my business card.

The final episode in this adventure happened early the next morning when I went back to my office to retrieve my wallet. I needed to meet my dinner partner from the night before  at 9:00am on the other side of town for an academic conference and wanted to repay him the $500 or so cost of dinner. But my bank–actually not a bank but the local post office in fact–did not open until 10:00am. What to do? I simply walked into the convenience store around the corner, put my card in the machine and withdrew the cash. For this I was charged a fee of approximately US $3.00 I bought a nice envelope, since it would be gauche to hand over cash without an envelope, and headed back to the subway.

Japanese convenience stores, open 24 hours, on almost every street corner, are magnificent consumer centers. You can buy all kinds of things there from deli meals to airplane tickets to cell phone contracts to a clean pair of underwear. Young people have started using them for their banking needs more than banks themselves because you are never more than five minutes away from one and you can do your business at any time of day or night.  Of course it did cost me something. But not more than what I would have paid to use another bank’s ATM in the US and I doubt that I could have withdrawn that much cash at most ATMs.

All in all, as a consumer I have to say that this incident was unbelievably low hassle relative to what I would expect at home. In fact you could say that my whole foolish mistake was enabled by how convenient it is, say, to purchase transportation services. I should add that my encounters with service providers at every step, from the waiter in the cafe to the automated cash machine in the convenience store, were courteous, helpful and respectful. No surly staff or incompetent bank employees in a telecenter.  For me at least, this all counts for a positive aspect of a market.

May 30, 2011
by Annelise Riles

The Nightmare of Transparency

In a recent Business Week article, Hernando de Soto is once again peddling his simplistic view of property rights as the path to pure market transparency. He argues, to considerable journalistic and popular acclaim, that the problem with derivatives markets is simply that property rights are not sufficiently well defined and standardized.  Bring in good old fashion property law and related tools such as title registration, he argues, and the markets will magically clean up.

As I discuss at some length in my book, the proposal is preposterous from the point of view of anyone who knows anything about property law. Property rights are never clear in the way that non lawyers imagine them to be.  As I show with regard to actual cases of property claims in the derivatives markets, as is the case with ordinary property rights, there is tremendous room for interpretation, confusion, conflict and gamesmanship within the language of property law.

De Soto should know better.  He claims to have come upon his insist through field research, and I would venture that even a few casual conversations with any legal expert in the derivatives markets would reveal how property sets the stage for conflict of a different kind rather than bringing pure clarity to things.  But since I have laid out the problems with De Soto’s claim that property achieves transparency in the book, let me ask a different question instead: is transparency tout court always a good thing?

One of the painful rituals of daily life in Tokyo at the moment is the daily review of government statistics on radiation levels.  In response to complaints that it was not sufficiently transparent about radiation risks, the government is now drowning us in numbers.  There are readings taken by each city, each prefecture, and by the national government for each city and prefecture.  There are numbers for each kind of radiation–cesium, iodine, and so on.  Of course the numbers produced by the national and local governments rarely match up.  And we are given no explanation of these numbers since that would be the biased view of government officials–it is just purely transparent information. Truck loads and truck loads of it.

So we the citizens are left to ask ourselves every day how we translate these numbers into an answer to questions like, is it safe for my four year old to play outside today? Is it safe for me to drink the milk or the water? What are the odds of my dying of cancer as a result of my exposure to the rain this summer? And so on.

My husband and I both have PhDs in social scientific subjects and are used to working with data. And yet the deeper we try to dig into these numbers–to compare them for example against the safety standards set by international bodies–the more confused things become. First, it is as if just about every international organization, and every local data collecting body in Japan, has its own system of units.  Conversion between these units turns out to be basically impossible as they are apples and oranges, measuring different things. But some of the problem is simply the violence of probabilities. Learning for example that exposure increases cancer risk by a certain percentage tells you nothing about your own situation since it is based on averages, across global populations (is the average nuclear victim an eighty year old Swede or a twenty year old Bangladeshi?).  And in the case of nuclear accidents we have so little data anyway that those probabilities are probably best described as guesses.

But even though we know that these numbers tell us next to nothing, we can’t stop ourselves. The information is there, it is transparent, so we feel almost compelled to enter into it. Its analysis becomes the daily ritual of our worry.  Did iodine levels go up or down compared to yesterday? And what does that mean, anyway relative to how much iodine our child absorbed, or how much he can absorb?  Every day this analysis of the numbers ends with the same sick feeling in the stomach of total confusion, total lack of clarity about an issue of paramount importance to our family. I experience this daily ritual as its own kind of political violence.  It is as if this absurd cacophony of purely ordered data is taunting me, leaving me all the more exhausted and demoralized.

Now I realize this transparency nightmare seems quite far away from the wonders of property law de Soto would prescribe for the derivatives markets. Yet it is not so different in fact.  After all, market transparency, which is what he advocates, is just a matter of the availability of data. If the data is available, the theory goes, some smart people will make sense of it all. And yet data itself is only meaningful within a framework.  Our problem is that we lack a framework for analyzing the numbers because the people who produced the numbers themselves also lack a singular and coherent framework.  In that situation, the consumer of transparency is saddled with the absurd burden of making meaning–making something standard and comparable–out of what by definition is not standard.  This is often the case in the derivatives markets as well.  In the derivatives markets traders often dodge the pure impossibility of the task by just doing what everyone else is doing–using the same model, the same pricing tool as the next guy, even if we all know its limitations. That is called a herd mentality and we have seen its disastrous effects.

May 1, 2011
by Annelise Riles
1 Comment

How can we better harness the insights of different disciplines to address market reform?

Last week we convened another meeting of our working group of economists, anthropologists, lawyers, psychologists and policy makers interested in how our disciplines could work together in new ways to solve market problems.  It is a very smart, high-powered group of creative people who truly have the best interest of the national and global economy at heart.  And the policy makers are brilliant, dedicated individuals who know how things work on the inside, and who think broadly about the issues.  Once again, our meeting was supported by the Tobin Project, as well as by the Clarke Program in East Asian Law and Culture at Cornell Law School.

The theme this time was health care insurance reform and we did some hard thinking about what our disciplines could say, practically, about what kind of insurance exchanges might help different kinds of consumers make the best choices possible for them.


But there is another running conversation at these meetings about how the disciplines can be reconfigured to work better together in the future. The disciplinary truce worked out in the early twentieth century was a kind of cold war-like division of the territory: anthropologists study exotic others, sociologists study deviant groups at home, psychologists study individuals, economists study markets, and so on. Thank goodness that along the way we learned that all these elements are inter-related and that each of these disciplines has much to say about every aspect of life. So how else could they work together?


One model that is emerging from our meetings is a kind of production model, beginning with original insights and moving all the way to the incorporation of ideas into policy.  Eric Johnson, a distinguished psychologist teaching at the Columbia Business School, suggested that anthropologists could provide the insight (based on ethnographic research), economists could provide the models, and psychologists could provide the data (based on experiments)–and that we need data and numbers to convince policy makers.


Another model seems to be a model of internal change within fields.  Peter Spiegler, an economist at U Mass Boston and one of the most truly original scholars I have ever encountered, suggested that economics needs to start incorporating ethnography into its own method of research, rather than just taking insights (about trust, or reciprocity or whatever) from anthropology and modeling them in the traditional way.  I argued that anthropologists, conversely, need to learn to value simplicity as well as complexity, and to communicate openly and clearly and generously with people in government and in other fields, as economists and psychologists have learned to do.


There are a lot of things that infuriate me about anthropology and anthropologists.  But at the end of the day, some of our most basic insights are sorely lacking in the policy world and could make an enormous contribution to market reform.  Here are just a few obvious ones:

-Asking about the givens: noticing what is so important that it is just taken for granted by everyone, including perhaps even the researcher.  For example, at our meeting, we were deep into how to structure consumer choices about insurance and one anthropologist asked “why do we value choice so much in the first place?”

-thinking about the global dimensions of even the most domestic policy problems, and thinking comparatively about policy problems. For example, what could we learn about health reform from Japan, or Singapore, or South Africa?

-thinking about the range of actors and interests involved in law reform.  For exaple once a law like the health care act is passed the story is not over–it has to be implemented by armies of regulators, interpreted in practice by physicians, drug companies and insurers, used by consumers…how do all these people come together in practice?

-reflexivity–realizing that academics are part of the picture and bear some responsibility for what we advocate for, and its consequences, intended and unintended.

Insight rather than data–ultimately ethnography gives you a picture, and a story, and helps you to to become aware of the aspects of a problem you may have ignored altogether in constructing your model or your policy proposal.  Private companies have grasped the value of this kind of insight and are employing ethnographers in large numbers to do market research and study organizational culture within their companies but we have a ways to go before it is adopted as broadly in policy circles.


What do you think are the strengths and weaknesses of each discipline in thinking about market reform? How do you think fields like economics, anthropology and law could better work together to address market reform?


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