Presentations at the Canadian Law and Economics Association annual meeting  on September 28, 2013 in Toronto.

Dynamic Regulation of the Financial Services Industry

Wulf A. Kaal

University of St. Thomas, Minnesota – School of Law


Wake Forest Law Review, 2014, Forthcoming
U of St. Thomas (Minnesota) Legal Studies Research Paper No. 13-24


Governance adjustments via stable rules in reaction to financial crises are inevitably followed by relaxation, revision, and retraction. The economic conditions and the corresponding requirements for optimal and stable rules are constantly evolving, suggesting that a different set of rules could be optimal. Despite the risk of future crises, anticipation of future developments and preemption of possible future crises do not play a significant role in the regulatory framework and academic literature. Dynamic elements in financial regulation as a supplemental optimization process for rulemaking could help facilitate rulemaking when it is most needed – ex-ante before crises – to curtail the effects of crises and suboptimal regulatory outcomes – ex-post after crises. By including dynamic elements, the regulatory sine curve of financial regulation could be optimized in relation to the phase-shifted first derivative (cosine curve) that describes common elements of financial crises. Dynamic regulation could help dampen the degree of volatility of both the cosine curve and the regulatory sine curve by creating an anticipatory regulatory response to financial crises.

Number of Pages in PDF File: 31

Keywords: dynamic regulation, new institutional economics, financial regulation, regulation of financial industries, financial crises

Evolution of Law: Dynamic Regulation in a New Institutional Economics Framework

Wulf A. Kaal

University of St. Thomas, Minnesota – School of Law


Festschrift in Honor of Christian Kirchner, 2014, Forthcoming
U of St. Thomas (Minnesota) Legal Studies Research Paper No. 13-17


The literature on New Institutional Economics (NIE) evaluates the relationship between public and private rulemaking in the evolution of law. This paper introduces the concept of dynamic regulation as an optimization process for the learning experience in the NIE framework. Dynamic regulation describes intra- and inter-jurisdictional feedback effects between different public rulemakers and between private and public rulemakers. Dynamic elements in the rulemaking process may increase the availability of relevant information for rulemaking and may improve institutional design.

Number of Pages in PDF File: 19

Keywords: new institutional economic, evolution of law, dynamic regulation, rulemaking

Accepted Paper Series 

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