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Sleeping with the enemy? On Hayek, constructivist thought, and the current economic crisis

Published online by Cambridge University Press:  19 March 2012

OLIVER KESSLER
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Abstract

The current economic crisis challenges the constitutive rules of global finance. Despite its various roots, dynamics, and consequences, the current reform debate is surprisingly limited in scope: it focuses on possible changes of Basle II and thus banking regulation only. This article suggests that the reason for this ‘gap’ can be found in the idea of asymmetric information. The idea that the asymmetric dispersion of information is the ‘real’ cause of the crisis is reiterated constantly in public documents. However, the argument rests upon two assumptions: that crises are exogenous to otherwise efficient and stable markets, and that finance is an autonomous field where the primary focus of the current reform can then concentrate on its laws. It is thought that it is enough to reform financial markets to stabilise the global economy. This article suggests that this belief is utterly misguided and argues that a more comprehensive picture of the current turmoil needs to abandon exactly these two assumptions. To pursue such an avenue, this article provids an interpretation of Hayek's social theory.

Type
Research Article
Information
Review of International Studies , Volume 38 , Issue 2 , April 2012 , pp. 275 - 299
Copyright
Copyright © British International Studies Association 2011

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References

1 See Thompson, Grahame, ‘What's in a frame’, Economy and Society, 38:1 (2009), pp. 520–4CrossRefGoogle Scholar.

2 An exception is the Turner Report that did try to raise further questions. However, it is quite telling that the Turner report was quickly silenced. For the report see {www.fsa.gov.uk/pubs/other/turner_review.pdf} last accessed 15 January 2012.

3 In this article, I do not deal with the EURO crisis in detail. The transformation of private into public debt that preceded the EURO crisis is a different question. This contribution focuses on the how to reform the global financial architecture debate.

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11 See in particular B. Rodney Hall, ‘Intersubjective Expectations’, p. 455.

12 In contrast to the efficient market hypothesis and the focus on rational choices, this forum conceived economic inter-actions as social acts, where destabilising tendencies are endogenous to financial practices. See in particular T. Sinclair, ‘Let's get it right’, p. 452 and Seabrooke and Tsingou, ‘Power Elites’, p. 459.

13 For the Keynes-based approach see in particular Best, Jacqueline, Limits of Transparency (Ithaca: Cornell University Press, 2005)Google Scholar; Widmaier, Wesley, ‘Keynesianism as a Constructivist Theory of the International Political Economy’, Millennium: Journal of International Studies 32:1 (2003), pp. 87–107CrossRefGoogle Scholar. The Keynes-based approach analyses the ideational foundations of monetary cooperation. In situations of Keynesian uncertainty, actors fall back on conventions and norms to form their preferences and interests. As norms are intersubjectively defined, it is thought that Keynes supports a dualist ontology (matter – ideas). That this however is simply not good enough for constituting a constructivist approach to IPE, see Kessler, Oliver, ‘From Agents and Structures to Minds and Bodies: on supervenience, quantum and the linguistic turn’, Journal of International Relations and Development, 10:3 (2007), pp. 243–71CrossRefGoogle Scholar.

14 It should be emphasised that I do not engage in some exegesis of what Hayek would have said about the crisis, nor do I want to revive a new Hayek based conservatism. There is more to Hayek's thought than just ‘he is a conservative’. If an author would predetermine a political position, then it would be hard to explain why the left is interested in Martin Heidegger or Carl Schmitt.

15 I'd call these processes economisation and financialisation respectively. For a very preliminary discussion see Kessler, Oliver, ‘After Sectors, Before the World: Finance, Security and Risk’, Security Dialogue, 42:2 (2011), pp. 197–215CrossRefGoogle Scholar.

16 For a terrific discussion see Schwartz, Herman, Subprime Nation: American Power, Global Capital and the Housing Bubble (Ithaca: Cornell University Press, 2009)Google Scholar.

17 See Kiffs, John and Mills, Paul, ‘Money For Nothing and Checks for Free: Recent Developments in U.S. Subprime Mortgage Markets’, International Monetary Fund Working Paper, 07/188 (2007), p. 7Google Scholar. See also Brunnermeier, Markus, ‘Deciphering the Liquity and Credit Crunch 2007–2008’, Journal of Economic Perspectives, 23:1 (2009), pp. 77–100CrossRefGoogle Scholar.

18 See T. Sinclair, ‘Let's get it right’; Marcin Kacperczyk and Philipp Schnabl, ‘When Safe Proved Risky: Commercial Paper during the Financial Crisis 2007–2009’, Journal of Economic Perspectives, 24:1 (2010), pp. 29–50. See also Ertürk, Ismail, Leaver, Adam, and Williams, Karel, ‘Hedge Funds as “War Maschine”: Making the Positions Work’, New Political Economy, 15:1 (2010), pp. 9–28CrossRefGoogle Scholar.

19 See Bieling, Hans-Jürgen, ‘Wenn der Schneeball ins Rollen kommt: Überlegungen zur Dynamik und zum Charakter der Subprime-Krise’, Zeitschrift für Internationale Beziehungen, 16:1 (2009), pp. 107–21CrossRefGoogle Scholar.

20 Brunnermeier, Markus, ‘Deciphering the Liquity and Credit Crunch 2007–2008’, Journal of Economic Perspectives, 23:1 (2009), pp. 77–100CrossRefGoogle Scholar; Mizen, Paul, ‘The Credit Crunch of 2007–2008: A Discussion of the Background, Market Reactions and Policy Responses’, Federal Reserve Bank of St Louis Review. 90:5 (2008), pp. 531–67Google Scholar; Wigan, Duncan, ‘Credit Risk Transfer and Crunches: Global Finance Victorious or Vanquished?’, New Political Economy, 15:1 (2010), pp. 109–25CrossRefGoogle Scholar.

21 For a discussion see Jonathan Eaton, Samuel Kortum, Brent Neiman, and John Romalis, ‘Trade and the Global Recession’, Working Paper w16666 (Cambridge, MA: National Bureau of Economic Research, 2011).

22 See Cecchetti, Stephen G., ‘Crisis and Response: The Federal Reserve in the Early Stages of the Financial Crisis’, Journal of Economic Perspectives, 23:1 (2009), pp. 51–75CrossRefGoogle Scholar.

23 In the current reform debate, the publications by the G20, the IMF, the FSB, and the BIS provide the core arguments and set the agenda and report on progress. Although there are plenty of other reports by NGOs and other regulatory bodies, they provide the institutional centre of the current debate, while the FSB seems to be the driving force of it all. It is here where basic conceptual questions are discussed. See in particular Financial Stability Board, ‘Improving Financial Regulation’, Report of the Financial Stability Board to G20 Leaders, 25 September 2009; Financial Stability Board, ‘Progress Since the Pittsburgh Summit in Implementing the G20 Recommendations for Strengthening Financial Stability’, 9 November 2009b; Financial Stability Board, ‘Press Release: Financial Stability Board meets on the Financial Reform Agenda’, 9 January 2010a; Financial Stability Board, ‘Promoting Global Adherence to International Cooperation and Information Exchange Standards; Basel: Financial Stability Board’, 10 March 2010b; Financial Stability Board and the International Monetary Fund, ‘The Financial Crisis and Information Gaps’ (Basel: FSB, May 2010); Financial Stability Board, ‘International Monetary Fund, Bank for International Settlement’, Report to G20 Finance Minsters and Governance, Guidance to Assess the Systemic Importance of Financial Institutions, Markets and Instruments: Initial Considerations, (Basel: Bank for International Settlement, 2010); International Monetary Fund, Global Financial Stability Report April 2009 (Washington, DC: International Monetary Fund) as the equivalent reports from October 2009 and April 2010.

24 See FSB and IMF, ‘The Financial Crisis’, p. 16.

25 See ibid., p. 11.

26 IMF (2009a), p. 114

27 FSF (2008a), p. 8.

28 Ibid., p. 13.

29 Of course, there is the debate on macroprudential regulation. However, the return of macroeconomics does not come with an epistemological change and will thus not provide an alternative approach. The papers are shot through with references to measures, indicators, and the need for better data.

30 FSF (2008a), p. 22

31 See also in this respect Davis, Aeron, ‘The Limits of Metrological Performativity: Valuing Equities in the London Stock Exchange’, Competition and Change, 10:1 (2006), pp. 3–21CrossRefGoogle Scholar; Ho, Karen, Liqidated: An Ethnography of Wall Street (Duke: Duke University Press, 2009)CrossRefGoogle Scholar; and Stark, David, The Sense of Dissonance (Princeton: Princeton University Press, 2009)CrossRefGoogle Scholar. I thank an anonymous reviewer for pointing this out to me.

32 Of course, one could argue that in fact Basle II is not part of the problem. That in fact Basle II is reductionist and actually not well suited for current problems see Kessler, Oliver, ‘Beyond the Economic Bias: the social construction of Economic Risks’, in Hay, Colin and Gofas, Andreas (eds), The Role of Ideas in Political Analysis (London: Routledge, 2009)Google Scholar. See also Sinclair, Timothy and King, Michael, ‘Private Actors and Public Policy: a Requiem For The New Basel Capital Accord’, International Political Science Review, 24:3 (2003) pp. 345–62Google Scholar.

33 Personally, I think the ‘Road to Serfdom’, the book for which Hayek is most famous for, is neither representative for his social theory nor particularly good.

34 Although Milton Friedman and Friedrich Hayek got along quite well personally, there are important differences between Friedman's monetarism and Hayek's later writings, with important methodological repercussions. See Friedman, Milton, ‘The methodology of positive economics’, Essays in Positive Economics (Chicago: University of Chicago Press), pp. 3–43Google Scholar; in contrast to Hayek's pattern recognition or discussion of complex phenomena.

35 See Hodgson, Geoffrey, Economics and Institutions (London: Routledge, 1999)Google Scholar.

36 The following discussion does not neglect the influence of Eugen von Böhm-Bawerk or Friedrich Freiherr von Wieser on Hayek's thought. However, I think that their influence is stronger on his early pieces on the business cycle and especially in his later thought came back to Menger. As it is probably well known, Menger was rather critical of von Böhm-Bawerk and considered his efforts as ‘the greatest mistake ever’. For a discussion of Menger's influence on Hayek, the best piece is still Hayek, Friedrich, ‘Carl Menger’, Economica, 1:4 (1934), pp. 393–420CrossRefGoogle Scholar.

37 In particular the subjective theory of value represents a milestone in economic thought and although it is widely considered as standard in economic theory, economists using mechanistic systems theory fail to understand many of its characteristics. This subjective theory of value is often enough misunderstood as constituting a marginal theory of utility. This interpretation however forgets the Kantian origin of his thought.

38 See in particular Book III of his Untersuchungen is headed as ‘The Organic Character of Social Phenomena’, see his Untersuchungen über die Methode der Sozialwissenschaften und der Politischen Ökonomie insbesondere (Dunker, 1883).

39 The article will return to this point later

40 von Hayek, Friedrich August, Individualismus und Soziale Ordnung (Salzburg: Wolfgang Neugebauer, 1976), p. 27Google Scholar.

41 von Hayek, Friedrich August, ‘Economics and Knowledge’, Economica, 4:13 (1937), pp. 33–54CrossRefGoogle Scholar.

42 von Hayek, Friedrich August, ‘The Use of Knowledge in Society’, The American Economic Review, 35:4 (September 1945), p. 519.Google Scholar

43 Heynemann Knight, Frank, Risk, Uncertainty and Profit, (New York: Harper and Row, 1921)Google Scholar; Maynard Keynes, John, ‘The General Theory of Employment’, Quarterly Journal of Economics, 51:2 (1937), pp. 209–23CrossRefGoogle Scholar.

44 Hayek quotes Michael Polanyi and later Gilbert Ryle to point to forms of tacit knowledge and knowing-how as alternative ways of knowing relevant for economic practices. Of course, there are serious differences between Polanyi and Ryle this article cannot discuss at this point. See Ryle, Gilbert, The Concept of Mind (New York. Barnes and Noble, 1949)Google Scholar; and Polanyi, Michael, Personal Knowledge: Towards a Post-Critical Philosohpy (London: Routledge, 1958)Google Scholar.

45 Friedrich Hayek, ‘The Use of Knowledge in Society’, p. 522.

46 Hayek, Friedrich, The Sensory Order (Chicago: Chicago University Press, 1952), p. 167Google Scholar. See also Hayek, Friedrich, The Fatal Conceit (Chicago: Chicago University Press, 1988), p. 89CrossRefGoogle Scholar.

47 Friedrich Hayek, ‘The Use of Knowledge in Society’, p. 522.

48 Friedrich Hayek, Die Irrtümer des Konstruktivismus, reprinted in Anmaßung von Wissen (Tübingen: Mohr, 1996), p. 21.

49 Rationality as consistency is put forward by expected utility theory and is particularly rooted in the Dutch Book argument. The Dutch book argument has been subject to an intense debate which attempted to make visible implicitly made assumptions. However insightful this debate is, I have to leave it aside at the moment. For newer contributions see Christensen, David, ‘Dutch Book Arguments Depragmatized: Epistemic Consistency for Partial Believers’, The Journal of Philosophy, 93:9 (1996), pp. 450–79CrossRefGoogle Scholar; Howson, Colin, ‘Dutch Book Arguments and Consistency’, PSA: Proceedings of the Biennial Meeting of the Philosophy of Science Association (1992 Volume Two: Symposia and Invited Papers, 1992), pp. 161–68Google Scholar; Waidacher, C, ‘Hidden Assumptions in the Dutch Book Argument’, Theory and Decision, 43:3 (1997), p. 3CrossRefGoogle Scholar. Of particular relevance are the ‘money pump’ argument, for example, Schick, Frederic, ‘Dutch Bookies and Money Pumps’, The Journal of Philosophy, 83:2 (1986), pp. 112–19CrossRefGoogle Scholar.

50 Further development of this thought can be found in the metaphorology of Blumberg. See Blumenberg, Hans, Die Legitimität Der Neuzeit (Frankfurt am Main: Suhrkamp, 1966)Google Scholar; for cultural cognition literature see Lakoff, George, Women, Fire, and Dangerous Things: What Categories Reveal About the Mind (Chicago: University of Chicago Press, 1987)CrossRefGoogle Scholar; Lakoff, George and Nâuänez, Rafael E., Where Mathematics Comes From: How the Embodied Mind Brings Mathematics into Being, first edn (New York, NY: Basic Books, 2000)Google Scholar; for biology of cognition see Maturana, Humberto and Varela, Francesco, Complexity and Cognition (Dordrecht: Reidel, 1980)Google Scholar; or second order cybernetics see von Förster, Heinz, Understanding Understanding: Essays on Complexity and Cybernetics (New York: Springer, 2003)CrossRefGoogle Scholar.

51 Hayek, Friedrich, ‘Degrees of Explanation’, in Hayek, Studies in Philosophy, Politics and Economics (Chicago: Chicago University Press, 1967), pp. 60–1Google Scholar. See also the link to modern logic a page later.

52 See Hayek, Friedrich, ‘Primacy of the Abstract’, in Friedrich Hayek, New Studies in Philosophy Politics, Economics and History of Ideas (Chicago: Chicago University Press, 1978), pp. 35–49CrossRefGoogle Scholar, in particular on p. 36. Of course, to argue that Hayek was influenced by Kant's philosophy of mind does not exclude more critical differences between Hayek and Kant at other points, like the possibility of an a priori science of history.

53 Ibid., p. 48.

54 F. Hayek, ‘The Use of Knowledge in Society’, p. 528.

55 Friedrich von Hayek, ‘Drei Quellen’, p. 34.

56 von Hayek, Friedrich, Recht, Gesetzgebung und Freiheit, 2 (Tübingen: Mohr), p. 43Google Scholar. Hayek even points to an agent-structure problem when he notes that it is equally possible to say that the thinking subject has created his culture as to claim the opposite, that culture creates the thinking subject. Friedrich von Hayek, ‘Drei Quellen’, pp. 38–72, on p. 41.

57 Widmaier, Wesley, ‘Keynesianism as a Constructivist Theory of the International Political Economy’, Millennium: Journal of International Studies, 32:1 (2003), pp. 87–107CrossRefGoogle Scholar.

58 Wittgenstein, Ludwig, Philosophical Investigation (Oxford: Blackwell), §85Google Scholar

59 Wittgenstein, Ludwig, Vorlesungen 1930–1935 (Frankfurt/Main: Suhrkamp, 1984), p. 350Google Scholar.

60 von Hayek, Friedrich, Law Legislation and Liberty, 1 (Chicago: Chicago University Press, 1973), pp. 50–1Google Scholar.

61 von Bertalanffy, Ludwig, General System Theory: Foundations, Development, Application (New York: Braziller, 1969)Google Scholar.

62 Explicit reference to eigen-values and autoppoiesis can for example be found in Friedrich von Hayek, ‘Die Überschätze Vernunft’, p. 84. For an analysis of constructivism and complexity see in particular the edited volume by Albert, Mathias, Cederman, Lars-Erik, and Wendt, Alexander, New Systems Theories of World Politics (London: Macmillan, 2010)Google Scholar.

63 One could think about contributions on ideas in world politics that go in similar (though I would say certainly not identical) directions. See, for example, Gofas, Alexander and Hay, Colin (eds), The Role of Ideas in Political Analysis (London: Routledge, 2010)Google Scholar.

64 The new emphasis on system-environment interaction has existed since the rise of non-equilibrium thermodynamics and the field interpretation of quantum physics have challenged ‘classic physical’ systems theory. As different as these approaches are, both challenge the possibility of ‘passive observation’. Increasingly, the cognitive capacities of systems – including the observer scientist – are acknowledged. One can think of Schrödinger's cat, where an observer manifests reality or paradoxical behaviour. Prigogine, and Prigogine, Stenger Ilya, From Being to Becoming: Time and Complexity in the Physical Science (New York: Freeman, 1980)Google Scholar; Prigogine, Ilya and Stengers, Isabelle, Order out of Chaos, (New York: Bantam, 1984)Google Scholar; Eigen, Manfred, The Hypercylce: A Principle of Natural Self-Organization (New York: Springer Verlag, 1979)CrossRefGoogle Scholar; and Fox, Stanley, The Emergence of Life (New York: Basic, 1988)Google Scholar. showed that bifurcation branches introduce time-irreversibility and thus history in natural systems. Similarly, the Grundlagenkrise inaugurated by Bertrand Russell's paradox led through Gödel's proof and Wittgenstein's linguistic turn to an abandonment of logic as a priori and objectively given Nagel, Ernest and Newman, James R., Gödel's Proof, rev. edn (New York: University of New York Press, 2002)Google Scholar. No sufficiently complex system is capable of providing for its own consistency, challenging one fundamental tenet of classic logic eliminative materialism. Even physical systems are not closed.

65 See Lloyd Morgan, Conwy, Habit and Instict (London and New York: Edward Arnold, 1896)CrossRefGoogle Scholar. In particular p. 120ff. See also Lloyd Morgan, Conwy, Emergent Evolution: The Gifford Lectures (London: Williams and Norgate, 1923)Google Scholar. A good discussion can be found in Mirowski, Philip, Natural Images in Economic Thought (Cambridge: Cambridge University Press, 1994)CrossRefGoogle Scholar; and Hodgson, Geoffrey, Economics and Institutions (London: Routledge, 1999)Google Scholar.

66 It should be emphasised however, that evolution theory is not to be understood in terms of a teleological process. It is not to be confused with anything like ‘survival of the fittest’. I am not quite sure whether the term of ‘cultural competition’ should not be replaced by some other evolutionary concept. For example, Hayek points with this concept to the different alternatives of organising societies. It simply points to the fact that ‘societies’ organise themselves differently and that it might be fruitful to consider categories of social differentiation.

67 Hayek, ‘The Use of Knowledge in Society’, p. 528.

68 Still a classic statement in the context of finance is Obstfeld, Maurice, ‘Models of currency crises with self-fulfilling balance of payments crises’, European Economic Review, 40:3–5 (1996), pp. 1037–47CrossRefGoogle Scholar. On different models of currency crises see Kessler, Oliver, Die Internationale Politische Ökonomie des Risikos (Wiesbaden, 2008)Google Scholar, chap. 2. This implies that constructivist IPE still needs to develop its own language which represents its own understanding of complex phenomena like the market, firms, competition, and prices. For example, Harrison White and Niklas Luhmann put forward the idea that the market is not a place where supply and demand meet, but that it should rather be regarded as an internal mirror within the economic system: it allows for self-description and self-observation of actors by placing oneself in context to one's competitor and customers. For possible avenues see Luhmann, , Die Wirtschaft Der Gesellschaft (Frankfurt: Suhrkamp, 1988)Google Scholar; White, Harrison C., ‘Where Do Markets Come From?’, American Journal of Sociolog, 87:3 (1981), pp. 517–47CrossRefGoogle Scholar.

69 Hayek, Friedrich, ‘The Meaning of Competition’, in Hayek, Friedrich (ed.), Individualism and the Economic Order (London: Routledge and Keagan Paul, 1949)Google Scholar; Hayek, Friedrich, ‘Competition as Discovery Process’, New Studies in Philosophy, Politics, Economics and the History of Ideas (London: Routledge and Keagan Paul, 1978b)CrossRefGoogle Scholar. For newer contributions in a broader Hayekian way see Loasby, Brian, Choice, Complexity and Ignorance: an Inquiry into Economic Theory and the Practice of Decision Making (Cambridge: Cambridge University Press, 1976)Google Scholar. See also his The Minds and Methods of Economists (Cambridge: Cambridge University Press, 1989); Kirzner, Isreal, Competition and Entrepreneurship (Chicago: University of Chicago Press, 1973)Google Scholar; Kirzner, Isreal, The Meaning of Market Process (London: Routledge, 1992)CrossRefGoogle Scholar; and Rothbard, Murray, Man, Economy and the State, 2 (Los Angeles: Nash, 1970)Google Scholar.

70 See in particular Sinclair, Timothy J., The New Masters of Capital: American Bond Rating Agencies and the Politics of Creditworthiness., ed. Katzenstein, Peter (Ithaca: Cornell University Press, 2005)Google Scholar.

71 Some may identify some resemblance to Michel Foucault's Order of Discourse. Indeed, I am convinced that much of what Hayek's and Foucault's recourse to complexity theory is not accidental and that much of what Hayek tries to get at is potentially interesting for Foucauldians. However, there are crucial semantic differences that require a longer justification than can be provided in this context.

72 Sociologists often refer to social differentiation to highlight the coexistence of different rationalities.

73 For a similar discussion see Kessler, ‘After Sectors’.

74 See also Aspers, Patrick, ‘Knowledge and Valuation in Markets’, Theory and Society, 39:2 (2009), pp. 111–31CrossRefGoogle Scholar; Langenohl, Andreas, ‘Finanzmarktkrisen als Deutungskrisen’ (mimeo, 2010)Google Scholar.

75 P. Aspers ‘Knowledge and Valuation in Markets’, p. 117

76 This includes economic models. MacKenzie, Donald, An Engine Not A Camera (Cambridge: Cambridge University Press, 2006)CrossRefGoogle Scholar.

77 See also T. Sinclair, ‘Let's get it right’, for an interpretation that highlights a similar point.

78 Ibid.

79 For a longer discussion see Kessler, ‘Uncertainty, Rationality, and the Study of Social Institutions’.

80 To emphasise these social dimensions, the social theory of risk has undergone a radical transformation where today different approaches from psychology, cultural theory, sociology, and post-structuralism coexist. For a general overview see Beck, Ulrich, Risikogesellschaft: Auf Dem Weg in Eine Andere Moderne (Frankfurt am Main: Suhrkamp, 1986)Google Scholar; Beck, Ulrich, World Risk Society (Malden, Mass: Polity Press, 1999)Google Scholar; Douglas, Mary, Risk and Blame: Essays in Cultural Theory (London; New York: Routledge, 1992)CrossRefGoogle Scholar; Ewald, François, ‘Insurance and Risk’, in Burchell, Graham, Gordon, Colin and Miller, Peter (eds), The Foucault Effect: Studies in Governmentality (Chicago: Chicago University Press, 1991)Google Scholar; Krimsky, Sheldon and Golding, Dominic (eds), Social Theories of Risk (Westport, Conn.: Praeger, 1992)Google Scholar; Luhmann, Niklas, Soziologie Des Risikos (Berlin: W. de Gruyter, 1991)Google Scholar; Lupton, Deborah, Risk and Everyday Life (Thousand Oaks, CA: Sage Publications, 2003)Google Scholar.

81 Ironically, the need to change from a static to a dynamic conception of stability is exactly the lesson of recent currency crises and bank runs. See Olivier De Bandt and Philipp Hartmann, ‘Systemic Risk: A Survey’, European Central Bank Working Paper Series (2000); Charles A. E. Goodhart, ‘Some New Directions for Financial Stability’, Per Jacobson Lecture (2004); Aerdt Houben, Jan Kakes, and Garry J. Schinasi, ‘Toward a Framework for Safeguarding Financial Stability’, IMF Working Papers, no. WP/04/101 (2004); Garry J. Schinasi, ‘Defining Financial Stability’, IMF Working Papers, no. WP/04/187 (2004).