Freedom and Financial Market Reform

Abstract

Abstract The argument in this chapter is a simple one, but with major implications for freedom and markets and the ends of financial market reform. Drawing upon both political philosophy and economic history, it argues that economic freedom depends on the accountability of institutions that structure individual market choices. Failure to recognize this fact gives license to concentrations of political and economic power and exacerbates principal–agent problems, creating firms that are often too big to fail, and an industry whose regulation is often too complex to enforce. These trends virtually guarantee the outsourcing of one of the central tasks of government in a free society: the creation and maintenance of institutions that structure markets. Freedom-minded financial market reform should be directed at a simpler and more narrow banking and regulatory system that counters the ways in which complexity, instability, power and information asymmetries, and regulatory capture make people less free.