33 Pages Posted: 8 Jan 2010
Date Written: January 8, 2010
Economists and economically-trained lawyers tend to speak about regulation from a perspective organized around the basic norm of optimization. By contrast, an important managerial literature espouses a perspective organized around the basic norm of reliability. The perspectives are not logically inconsistent, but the economist’s view sometimes leads in practice to a preoccupation with decisional simplicity and cost minimization at the expense of complex judgment and learning. Drawing on a literature often ignored by economists and lawyers, I elaborate the contrast between the optimization and reliability perspectives. I then show how it illuminates current discussions of the reform of bank regulation.
Suggested Citation: Suggested Citation
Simon, William H., Optimization and its Discontents in Regulatory Design: Bank Regulation as an Example (January 8, 2010). Columbia Public Law Research Paper No. 10-224. Available at SSRN: https://ssrn.com/abstract=1533446 or http://dx.doi.org/10.2139/ssrn.1533446
By John Morrall