Regulating Systemic Risk: Towards an Analytical Framework

The global financial crisis demonstrated the inability and unwillingness of financial market participants to safeguard the stability of the financial system. It also highlighted the enormous direct and indirect costs of addressing systemic crises after they have occurred, as opposed to attempting to prevent them from arising. Governments and international organizations are responding with measures intended to make the financial system more resilient to economic shocks, many of which will be implemented by regulatory bodies over time. These measures suffer, however, from the lack of a theoretical account of how systemic risk propagates within the financial system and why regulatory intervention is needed to disrupt it. In this Article, we address this deficiency by examining how systemic risk is transmitted. We then proceed to explain why, in the absence of regulation, market participants cannot be relied upon to disrupt or otherwise limit the transmission of systemic risk. Finally, we advance an analytical framework to inform systemic risk regulation

Reconstructing World Politics: Norms, Discourse, and Community

This Article argues that the conventional (rationalist) approach to world politics characterized by political bargain cannot fully capture the new social reality under the contemporary global ambience where ideational factors such as ideas, values, culture, and norms have become more salient and influential not only in explaining but also in prescribing state behaviors. After bringing rationalism’s paradigmatic limitations into relief, the Article offers a sociological framework that highlights a reflective, intersubjective communication among states and consequent norm-building process. Under this new paradigm, one can understand an international organization as a “community” (Gemeinschaft), not as a mere contractual instrument of its contracting parties (Gesellschaft). The Article applies the new paradigm to the World Trade Organization (WTO) as it describes the WTO’s institutional evolution from a power-oriented, tariff-reducing contract to a norm-oriented world trade community