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A Pigovian Approach in a Globalizing Financial Industry

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Neoliberalism 2.0: Regulating and Financing Globalizing Markets

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Abstract

In this chapter I will be exploring the application of the Pigovian theory to an industry that is known for its many particularities. The financial industry has become the poster child for everything that resembles globalization, i.e. interconnectedness and the risks that it produces, increased competitiveness and an industry that is constantly fueled by innovations of all sorts. It has also received lots of attention from regulators. In that sense, the financial industry is a typical ‘command-and-control’-regulated type of industry. That in itself makes sense. The financial industry is a private industry, but to a large degree it exercises a public function: that of managing deposits and subsequently the effective functioning of the credit intermediation process between the demand and supply of capital in the real economy. Not surprisingly, regulators in the different countries, and in more recent decades the EU, have been concerned about the trade-off between the private interest of share- and bondholders in banks on the one hand and the public interest of credit intermediation and deposit management on the other.

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Nijs, L. (2016). A Pigovian Approach in a Globalizing Financial Industry. In: Neoliberalism 2.0: Regulating and Financing Globalizing Markets. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-137-53556-6_6

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