ABSTRACT
Many economic policy debates during the past two decades have been guided by a principle that could be characterized as “regulatory skepticism.” This skepticism has its roots in historic experience with the limits of economic policy and the daily experience with tight constraints policymakers have to face in a globalized world. This general skepticism has affected some areas in economics more than others. Financial regulation is an issue that has been relatively unaffected. It is a widely held conventional wisdom that the financial system has to be firmly embedded in quite an extensive regulatory framework, and debates seem to revolve around details of this framework rather than focus on the principle itself.
