TY - JOUR
T1 - The Institutionalist Roots of Macroprudential Ideas
T2 - Veblen and Galbraith on Regulation, Policy Success and Overconfidence
AU - Baker, Andrew
AU - Widmaier, Wesley
PY - 2014/7
Y1 - 2014/7
N2 - One consequence of the global financial crisis has been to prompt debate over macroprudential regulation - meant to limit private risk-taking that threatens systemic stability. In this paper, we stress the roots of macroprudential ideas in the Institutionalist economics of Veblen and Galbraith in a way that highlights both unrecognised policy possibilities and underappreciated impediments to policy effectiveness, arguing in particular that regulatory success can breed overconfidence. First, we argue that while Veblen's views anticipated macroprudential arguments, they also obscured tensions between the technocratic acumen of policy 'engineers' and popular legitimacy. Second, we argue that while Galbraith's views similarly shaped the postwar Keynesian policy mix, they also echoed Veblen in underrating the potential for populist resentment of an intellectual 'technostructure'. We conclude that while this analysis can be seen as highlighting an overlooked century of macroprudential debate, it also demonstrates the potential for technocratic overconfidence - which can eventually undermine policy legitimacy and effectiveness.
AB - One consequence of the global financial crisis has been to prompt debate over macroprudential regulation - meant to limit private risk-taking that threatens systemic stability. In this paper, we stress the roots of macroprudential ideas in the Institutionalist economics of Veblen and Galbraith in a way that highlights both unrecognised policy possibilities and underappreciated impediments to policy effectiveness, arguing in particular that regulatory success can breed overconfidence. First, we argue that while Veblen's views anticipated macroprudential arguments, they also obscured tensions between the technocratic acumen of policy 'engineers' and popular legitimacy. Second, we argue that while Galbraith's views similarly shaped the postwar Keynesian policy mix, they also echoed Veblen in underrating the potential for populist resentment of an intellectual 'technostructure'. We conclude that while this analysis can be seen as highlighting an overlooked century of macroprudential debate, it also demonstrates the potential for technocratic overconfidence - which can eventually undermine policy legitimacy and effectiveness.
KW - Galbraith
KW - Keynesianism
KW - Veblen
KW - constructivism
KW - institutionalism
KW - macroprudential regulation
UR - http://www.scopus.com/inward/record.url?scp=84904053936&partnerID=8YFLogxK
U2 - 10.1080/13563467.2013.796447
DO - 10.1080/13563467.2013.796447
M3 - Article
SN - 1356-3467
VL - 19
SP - 487
EP - 506
JO - New Political Economy
JF - New Political Economy
IS - 4
ER -