Essays on The Instability of Markets and the Need for Regulation Report

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The paper "The Instability of Markets and the Need for Regulation" is a great example of a report on macro and macroeconomics. This paper critically examines the notion that markets are unstable structures, and are thus, in constant need for organization and regulation. The basic argument that is presented in the paper is that, indeed, markets are completely unstable and that they cannot be relied upon to regulate themselves. This means that governments need to intervene in order to ensure that markets are regulated as a way of preventing the severity arising from instances of bursts and volatility that usually arise from the inherent nature of markets.

Regulation is also meant to cushion the economy against the undesirable financial, economic, and social consequences of the volatility of markets. The essay is divided into three key parts as follows. Part one is about a review of the theoretical bases of the two notions of stability versus instability of markets. The second part of the essay is about the global financial crisis in the context of other forms of financial and economic crises and the lessons that can be learned from them with regard to the inherent instability of markets.

The third part of the essay sums up the argument that it is necessary for the government to regulate markets as a way of preventing the occurrence of crises and cushioning the economy from the effects of the volatility of markets. Market Stability versus Instability: Theoretical Considerations The argument as to whether markets are inherently unstable or stable is complex. What needs to be understood is that both arguments are compelling and have far-reaching ramifications in the world.

On one hand, the assumption that markets are stable means that markets are efficient in nature and that there is no need for governments to interfere in the manner in which the markets operate by attempting to regulate specific aspects therein. This argument implies that markets are able to correct their own mistakes and therefore, advocate for a complete deregulation of markets. On the other hand, the notion that markets are unstable is borne out of the belief that the very nature of markets makes them prone to volatility and sudden changes in prices.

It is this uncertainty that makes markets open to sudden changes that have the potential of disrupting social and economic equilibrium in the world.

References

Allen, Franklin and Elena Carletti. 2009. “The Global Financial Crisis: Causes and Consequences.” http://www.bm.ust.hk/gmifc/Prof.%20Allen%20&%20Carletti_The%20Global%20Financial%20Crisis.pdf

Anderson, Spencer. 2000. “A History of the Past 40 years in Financial Crises.” International Financial Review. http://www.ifre.com/a-history-of-the-past-40-years-in-financial-crises/21102949.fullarticle

Ang, Andrew, William N. Goetzmann, and Stephen M. Schaeffer. 2011. “Review of the Efficient Market Theory and Evidence.” https://www0.gsb.columbia.edu/faculty/aang/papers/EMH.pdf

Bresser-Pereira, Luiz Carlos. 2010. “The Global Financial Crisis, Neoclassical Economics, and the Neoliberal Years of Capitalism.” https://regulation.revues.org/7729#tocto1n4

Claessens, Stijn and M. Ayhan Kose. 2013. “Financial Crises: Explanations, Types and Implications.” International Monetary Fund Working Paper 13/8. https://www.imf.org/external/pubs/ft/wp/2013/wp1328.pdf

Crotty, James. 2011. “The Realism of Assumptions Does Matter: Why Keynes-Minsky Theory Must Replace Efficient Market Theory as the Guide to Financial Regulation Policy.” http://people.umass.edu/crotty/Oxford_draft_April_27_2010_final.pdf

de Glossop, Kim. 2011. “The Inherent Instability of the Financial System.” The Journal of Business, Entrepreneurship and Law 4(2): 483-503. http://digitalcommons.pepperdine.edu/cgi/viewcontent.cgi?article=1067&context=jbel

Karstasova, Jekaterina, Rita Remeikiene, Ligita Gaspareniene and Deimanté Venclauskiene. 2014. “Transformation of Efficient Market Hypothesis under the Influence of Behavioural Finance.” Mediterranean Journal of Social Sciences 5(13): 327-333. http://www.mcser.org/journal/index.php/mjss/article/viewFile/3590/3529

McKibbin, Warwick J. and Andrew Stoeckel, A. 2009. “The Global Financial Crisis: Causes and Consequences.” Working Papers in International Economics 2.9. http://www.lowyinstitute.org/files/pubfiles/McKibbin_and_Stoeckel,_The_global_financial_crisis.pdf

Minsky, H.P. 1980. “Capitalist Financial Processes and the Instability of Capitalism.” Journal of Economic Issues 24(2): 505-523. http://www.levyinstitute.org/pubs/tymoigne_1.pdf

Mouhammed, Adil H. 2006. “Instability of Capitalism Inflation, Unemployment and Business Cycles.” Zb. Rad. Ekon. Fak. Rij. 24(2): 165-184.

Tabb, William K. 2004. Economic Governance in the Age of Globalization. New York: Columbia University Press.

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