The Quest for Better Bankers, Better Banks Requires Better Economists
Review by William K. Black
[This review originally appeared in Concurring Opinions]
In Better Bankers, Better Banks, Claire Hill and Richard Painter of the University of Minnesota Law School signal their approach in the subtitle: “Promoting Good Business through Contractual Commitment.” This review explains why their thesis is so timely in terms of the most important theoretical debates boiling in economics and banking regulatory policy and the severe degradation of bankers and banks over the last 30 years. Contractual commitment was, of course, the heart of Dr. Oliver Williamson’s approach to explaining modern capitalism. Williamson, in work that led to being made a Nobel Laureate in Economics, argued that corporations were not simply a “nexus of contracts,” but also that these contracts had evolved to suppress the enormous danger to commerce posed by the powerful incentive of profit-maximizing actors to engage in “opportunistic behavior” whenever “information” was “asymmetrical.” In The Economics Institutions of Capitalism, Williamson defined opportunistic behavior broadly and starkly as “self-interest seeking with guile.”
