Document Type

Book Chapter

Publication Date

2019

DOI

https://doi.org/10.1017/9781108612821.002

Abstract

This chapter applies the “Legal Theory of Finance” (LTF) I developed in a paper, which was published in the Journal of Comparative Economics in 2013. Together with other research projects, conferences, and workshops conducted in the intervening period, this chapter illustrates the explanatory powers of the theory and its ramifications for the regulation of financial systems. I am grateful for the conference and this volume, and to the other authors in it who have tested LTF in application to new circumstances as they offer a good opportunity to step back and ask more basic questions about LTF:

  1. What is the nature of this theory and how can it help us understand financial markets?
  2. What are the possible implications of this theory for regulating financial markets, both nationally and globally – the topic of the conference that motivated this book’s publication?
  3. What are the implications of the theory for democratic governance?

To start, I will briefly summarize the building blocks of the original theory. In the second part of this chapter, I will extend these buildingblocks to a process analysis of the financial system. I will argue that a better understanding of financial systems, their construction, regulation, and failure, we need to understand both public and private law,and the use of one to undo the other. Private law, I will argue, furnishes the basic elements for financial assets and their issuers, while public lawand regulation seeks to mitigate the risk they might pose for stability. It is often feared that excessive public regulation can “kill” the market; less well appreciated is that with the help of private law, the effects of most regulation can be muted.

Disciplines

Banking and Finance Law | Law

Comments

This material has been published in "The Political Economy of Financial Regulation", edited by Emilios Avgouleas and David C. Donald. This version is free to view and download for private research and study only. Not for re-distribution or re-use.

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