January 18, 2012
by Annelise Riles
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Broadening the methods for studying financial regulation

In my earlier post I discussed some ways we need to broaden the subject of financial
regulation.  Doing so will also require broadening the methods we use to study
financial markets.  It is exciting to see the proliferation of new methods and approaches to studying financial markets and their regulation in the past few years. Here are just a few thoughts about some ways to do this.
  • We need to begin from empirical realities, whatever those are, and not from existing legal categories. The fact is that the legal categories were produced in response to an earlier time in financial markets and bear increasingly little relationship to the reality of markets today. Yet we persist in teaching, researching and thinking about financial regulation as if, for example, insurance, banking and securities were separate fields.  But if we start with what people in the markets tell us, and what we can observe about regulatory problems on the ground, and reason inductively about regulatory issues, rather than deductively from existing legal categories, we will produce analyses that are much more relevant to problems now.
  • Beginning with empirical realities means doing empirical research–talking to people, observing behavior, gathering every possible kind of data about what is actually happening.  This is tough work. Wouldn’t it be nice if we could just stick to our law books! No such luck.
  • We need as many different methodologies and disciplinary approaches to observing these realities as possible.  Economic data, of course. But also historical research, ethnographic research, sociological studies, even new kinds of theory, from alternative economic models to anthropological theory of exchange to political theories of regulation.
  • If we accept the premise of my previous post that markets by their nature are always combining with new subjects-the environment, politics, international institutions and so on–then I have more bad news: we need to start bringing the insights of other fields of law, from environmental law to international institutions, to bear on financial regulatory questions.  For example how can we make sense of the current boom in energy derivatives if we don’t know anything at all about the energy industry and how it is regulated globally?  Or how can we think about what strategies for international financial regulation will work without engaging with the insights of international law and institutions?  Or how can we evaluate the question of how bonuses should be regulated without engaging with debates in labor and employment law and policy? This probably will require collaborating with colleagues with expertise in these fields.
  • But the good news is that we don’t need to do it all alone.  And this brings me to one fruitful avenue for research: collaboration. For too long, legal thinking has been a fairly lonely exercise. But one approach to doing all of the above might be to find new ways of working collaboratively with practitioners in the markets and in government.  Thinking together about theory and practice can produce kinds of insights and solutions that neither side could imagine alone.  Of course how to do this, when the temporality, the standards of evaluation, and the political pressures of our careers as thinkers in the academy or in government or in the market are so different is not easy. Working through these challenges is its own challenge for our field.

January 9, 2012
by Annelise Riles
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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.
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