TY - JOUR
T1 - Innovation-Framing Regulation
AU - Ford, Cristie
PY - 2013
Y1 - 2013
N2 - This paper aims to provide insights into the effective regulation of private sector innovation. It coins a term – “innovation-framing regulation” – to describe a particular quality of the regulation that characterized much of financial regulation in the recent era. After briefly sketching a particular financial innovation (securitization and the marketing of securitized assets on the derivatives markets) it describes three regulatory interactions with that innovation: the Basel II Capital Accords, the Asset-Backed Commercial Paper Crisis in Canada, and the ongoing notice-and-comment rulemaking process surrounding the Volcker Rule in the United States. While each case study is different, in each one the regulatory regime exhibits a lack of understanding about the phenomenon of innovation it is grappling with. The paper identifies three key assumptions that are ripe for re-evaluation: the notion that private sector innovation is beneficial, virtually by definition; the assumption that the regulatory moment is the crucial moment in regulatory design; and the belief that innovation somehow sits outside regulation and can be untouched by it. The paper argues that effective regulation of private sector innovation requires a clearer and more nuanced understanding of innovation, and engagement with the normative choices underpinning innovation-framing regulation.
AB - This paper aims to provide insights into the effective regulation of private sector innovation. It coins a term – “innovation-framing regulation” – to describe a particular quality of the regulation that characterized much of financial regulation in the recent era. After briefly sketching a particular financial innovation (securitization and the marketing of securitized assets on the derivatives markets) it describes three regulatory interactions with that innovation: the Basel II Capital Accords, the Asset-Backed Commercial Paper Crisis in Canada, and the ongoing notice-and-comment rulemaking process surrounding the Volcker Rule in the United States. While each case study is different, in each one the regulatory regime exhibits a lack of understanding about the phenomenon of innovation it is grappling with. The paper identifies three key assumptions that are ripe for re-evaluation: the notion that private sector innovation is beneficial, virtually by definition; the assumption that the regulatory moment is the crucial moment in regulatory design; and the belief that innovation somehow sits outside regulation and can be untouched by it. The paper argues that effective regulation of private sector innovation requires a clearer and more nuanced understanding of innovation, and engagement with the normative choices underpinning innovation-framing regulation.
KW - Asset-Backed Commercial Paper
KW - Basel II
KW - Dodd-Frank Wall Street Reform and Consumer Protection Act
KW - Volcker Rule
KW - financial crisis
KW - innovation
KW - regulatory design
UR - http://www.scopus.com/inward/record.url?scp=84881054906&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84881054906&partnerID=8YFLogxK
U2 - 10.1177/0002716213489249
DO - 10.1177/0002716213489249
M3 - Article
SN - 0002-7162
VL - 649
SP - 76
EP - 97
JO - Annals of the American Academy of Political and Social Science
JF - Annals of the American Academy of Political and Social Science
IS - 1
ER -