FINANCIAL REGULATION IN THE GLOBAL ECONOMY AS PROPERTY RIGHTS

People who spend their lives studying economics often develop odd attitudes towards government. Economists with a rightward perspective can become infatuated with the beauty of an untarnished free market economy- how its perfect symmetries create an astonishingly efficient information processing and action coordinating machine. To them, government is a nuisance that gums up this perfection and thereby destroys wealth, stunts progress, and harms people. Economists of a leftward persuasion see the free market economy as a soulless juggernaut, devoid of ethics or morality, that tramples human beings. They see government as a lash for taming the free market economy. By moving a supply curve left and a demand curve up, by raising a wage level here and lowering an interest rate there, government can infuse an ethical quality into what would otherwise be a soulless monster. These two views are quite similar: for both, government is something outside the economy. From the right, it is sand in the wheels; from the left, it is a guiding hand. But in neither case is government “inside ” the economy or, in economists ’ jargon, “endogenous”. Our basic premise here is that this is wrong. Both views are deeply misleading in a modern market economy, and were never really right. This is because the government has th