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.