The Limits of Regulation

Monday, October 10, 2011, 9.00–10.30, CERGE-EI

In cooperation with CERGE-EI

 

Keynote Speech:

Robert Hahn, Director of Economics, Smith School of Enterprise and the Environment, Oxford University, United Kingdom

 

Moderator:

Hana Lešenarová, Member, Corporate Council, Forum 2000 Foundation, Associate Director, Control Risks Deutschland, Germany/Czech Republic

 

Panel Discussion:

Hassane Cisse, Deputy General Counsel, Knowledge and Research, The World Bank, Senegal

Zdeněk Tůma, Former Governor, Czech National Bank, KPMG, Czech Republic

 

 

The panel discussed the various aspects of the limits of regulation, understanding the risks and how it affects not only society as a whole, but also the ruling authorities. The panel was opened by Hana Lešenarová, who introduced the three speakers, beginning with Robert Hahn.

Robert Hahn began with a brief history of regulation, using metaphoric historical parallels with the regulation of the price of bread in France and prohibition in the United States which led to public outcries and court cases. Regulation brings with it a lower consumption, higher price and becomes associated with crime. “Rules are meant to be broke” as regulation is hard to enforce – there are limits but there are always the side effects.

 

Hassane Cisse stressed the importance of understanding which rules need to be in place and their level of effectiveness at both the national and international levels as “one size does not fit all”. The international regulatory bodies must keep national sovereignty and individual's freedom at hand while keeping the three important elements – legitimacy, transparency, and accountability.

 

On this note, Zdeněk Tůma pointed out, that with power comes a large responsibility. He also stressed that there was a wrong understanding of the risks involved, as rules do not help us to understand the risks. All speakers, coming from the academia, public and private sector, agreed that there needs to be more regulation.

 

The panel was followed by an interesting debate on how regulations were influenced, how to enforce them, who takes the blame, and most importantly, the need for “smart rules”. As the blame is also at the individual level, there will be a shift of power to the authorities and as Zdeněk Tůma warned, “there will be a more difficult world as it is difficult to predict how the financial market will be in the future”.