The ontology of financial markets and the policy paradigm of financial regulation

Abstract

ABSTRACT This study aims to discern the ontological assumptions of the financial regulatory paradigm to clarify the meaning of a paradigm shift and the significance of the macroprudential turn in global financial regulation. An ontological understanding of financial markets is a key requirement to understand the hard core assumptions of the financial regulatory paradigm because the conflation of distinct ontologies makes it impossible to maintain the internal coherence of the financial regulatory paradigm. In terms of the ontological assumptions of the financial regulatory paradigm, the macroprudential turn in global financial regulations after the 2008 financial crisis fell short of leading to a paradigm shift in global financial regulation since it brought about an explanatory rather than ontological change. Macroprudential ideas rejected the explanatory reductionism of existing microprudential regulation without abandoning its ontological individualism.