Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-64883
Falkinger, Josef (2012). Em-powering economics: Some thoughts on policy and financial markets. Working paper series / Department of Economics 93, University of Zurich.
This paper addresses the discussion between economic power and the power of politics with particular focus on financial markets. After general reflections about the economic basis of power, the paper discusses in a general equilibrium framework how financial innovations can lead to risk creation and an inflation of financial products. This creates a fundamental disorder in the financial system which from an aggregate point of view can be described in a standard portfolio framework, in which higher rates of return go hand in hand with higher private risks but also with increasing externalized (social) risk and insurance illusion. Rate of return regulation is proposed as an appropriate regulatory measure. Alternatively the deficiency could be cured by admission regulations for financial products which put the burden of proof for no external (systemic) damages of a financial instrument to the issuer.
|Item Type:||Working Paper|
|Communities & Collections:||03 Faculty of Economics > Department of Economics|
Working Paper Series > Department of Economics
|JEL Classification:||D53, G01, G18, A11|
|Uncontrolled Keywords:||Power, financial crisis, risk-creation, inflation of financial innovations, rate of return regulation|
|Deposited On:||26 Sep 2012 11:56|
|Last Modified:||07 Mar 2013 12:25|
|Series Name:||Working paper series / Department of Economics|
|Number of Pages:||19|
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