
Contents
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Public Governance and the Problem of Time Public Governance and the Problem of Time
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Private Governance and the Problem of Time Private Governance and the Problem of Time
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An Example: The Legality of Rehypothecation of Collateral in the Derivatives Market An Example: The Legality of Rehypothecation of Collateral in the Derivatives Market
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Legal Fictions as Placeholders Legal Fictions as Placeholders
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The Temporality of Legal Technique The Temporality of Legal Technique
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Private Legal Techniques for Public Regulatory Purposes Private Legal Techniques for Public Regulatory Purposes
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Conclusion Conclusion
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Notes Notes
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Four Placeholders: Engaging the Hayekian Critique of Financial Regulation
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Published:May 2011
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Abstract
This chapter provides a discussion of private and public governance by considering how private legal technique might translate into new public governance methods. The debate on the proper relationship between the state and the market, and regarding the optimal design of regulatory institutions, often turn on assumptions about the workings of legal expertise—and in particular about the difference between public expertise and private expertise. This chapter takes on Hayekian arguments against government regulation through a detailed examination of real-world examples of how public and private legal technologies manage the temporal dimensions of risk in the over-the-counter (OTC) derivatives markets. Hayek's description of the limitations of bureaucratic planning resonates with the sense of powerlessness and frustration experienced by many government officials as they attempt to manage economic fluctuations. But Hayek's account of the limits of well-meaning public legal expertise is far less complete when it comes to the strengths of private legal reasoning. Public reasoning has temporal weaknesses, so private reasoning must have equivalent temporal strengths. In order to understand the root of this legitimacy gap, the chapter considers how collateral, as a private legal technology, handles the temporal uncertainties surrounding market risk.
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