Abstract
This paper explores a pluralist approach to policy with respect to the financial system in the wake of the crisis. We consider first what is involved in a pluralist approach to policy more generally, and how this may be justified. This includes a pluralist stance with respect to different approaches to economic theory, pluralism in the sense of interdisciplinary enquiry, pluralism in terms of the range of methods employed, and pluralism with respect to recognition of the plurality of culture and values in society. Implications are drawn for how the banking crisis is framed, how it is explained by theory and thus how policy is designed. In addressing these issues, current mainstream theory focuses on a narrow definition of rational behaviour which, within competitive markets, generates a socially-optimal outcome. This approach is governed by a mathematical formalist methodology, and encourages policy to incentivise this kind of rational behaviour, with respect, for example, to inflation targeting and addressing moral hazard. Pluralist theory would instead recognise the socio-psychological and institutional/evolutionary foundations of money and banking, such that policy needs to focus on rebuilding confidence and addressing moral (including distributional) issues. The relevant analysis would require a range of methods and would address pluralities within society.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.