Assistant Professor of Economics
We need a regulator, or at least a coordinator, but that body should only have jurisdiction over issues where decisions made in one place have consequences for other places, but where the decision-maker does not fully internalize all those consequences. So for issues like climate change, but not necessarily for financial markets where there is a price mechanism (i.e., a market) that forces the decision-maker to account for the consequences of his decisions elsewhere. But an important question, given the current financial crisis, is whether these price mechanisms work well.
Frederick K. Weyerhaeuser Professor of Resource Policy and Management
Global regulation on reducing greenhouse gases, particularly CO2, is so far illusory. Simply accounting for all the world’s CO2, including its stocks and flows, has not been possible; likewise, deciding how to slow or reverse human production is at best an imperfect work in progress.
Two approaches to the challenge stand out: cap and trade or a straight tax on carbon emissions. The former is a complicated scheme, with its reliance on carbon trading in markets, that has so far featured high volatility in price setting for carbon while it simultaneously enables lying, cheating, and stealing by those most directly involved in it. The latter is a far simpler and more efficient means to control carbon emissions. It also allows more transparency and greater predictability — features that make for good politics and business, respectively.
Distinguished Faculty Fellow
We do need a global regulator, for the same reasons that we need global accounting standards. Unfortunately, just as we have been unable to attain the latter, we are unlikely to get the former.
Stephen M. Davis
Yale University School of Management’s Millstein Center for Corporate Governance and Performance
Yes we do, or something close to it. We can no longer sustain the idea that capital market transactions which ignore borders can co-exist with outmoded, nation-based oversight. Systemic risks are too great, and too easily spread like viruses in an interdependent, global capital market.
Common international regulatory standards must be a first step towards airtight coordination of securities supervision across frontiers. We might not need a single super regulator, but we can at least work toward a single, high-level standard of protection.