Reinventing Regulation with No Guiding Theories

The transcript discusses the challenges faced in financial regulation, highlighting the need for new regulatory systems due to the inadequacy of previous theories and assumptions. It critiques the reliance on free market principles, such as the Greenspan doctrine, and emphasizes the importance of understanding real-world economics and human behavior over simplistic mathematical models.

What is the main challenge faced by regulatory policy makers in financial centers according to the speaker?

• Lack of a clear underlying theory for current financial systems

• Excessive government intervention

• Over-reliance on technology

• High taxation rates

What was the Greenspan doctrine's assumption about financial innovations?

• They must be beneficial as they survived free market competition

• They were inherently risky and should be avoided

• They required strict government regulation

• They were too complex to understand

According to the speaker, what was a major flaw in the belief about CDOs?

• They were only beneficial for large corporations

• They were assumed to distribute risk efficiently without evidence

• They were not profitable

• They were too simple to be effective

What does the speaker suggest is necessary for understanding real-world economics?

• Ignoring historical data

• Focusing on real institutions and human behaviors

• Relying on complex mathematical models

• Increasing government control

What does the speaker imply about the previous economic assumptions?

• They were based on accurate predictions

• They were universally accepted

• They were overly simplistic and not reflective of reality

• They were too complex to be useful