Center on Global Legal Transformation Awarded Grant to Address Flaws in Existing Economic Theories
Initiative to Analyze Why Conventional Economic Wisdom and Regulatory Police Failed to Predict Global Financial Crisis
Public Affairs, 212-854-2650
New York, Oct. 21, 2010—The new Center on Global Legal Transformation at Columbia Law School, led by Katharina Pistor, the Michael I. Sovern Professor of Law, has been awarded a grant to examine why existing law and finance theories failed to predict the global financial crisis and explain market developments leading up to it. The grant was conferred by the Institute for New Economic Thinking (INET), a nonprofit organization founded last year by philanthropist George Soros to promote changes in economic theory and practice.
The grant will fund the center’s Global Finance and Law Initiative, which works from the core premise that well-established economic paradigms not only failed to predict the financial crisis, but were ill-equipped to develop adequate policy and regulatory responses. The initiative will focus on developing alternative theories that can better capture the interaction between law, financial regulation, and market development, in an effort to improve existing analytical frameworks and establish mechanisms to lower the risk of any future large-scale financial crises.
“We found there was a critical gap in economic, policy, and legal thinking when it came to heading off a crisis of the magnitude that we experienced, and when developing regulatory reforms to respond to it,” Pistor said. “Our goal is to explain why our analytical and regulatory frameworks have failed so that we can improve our ability to address problems in the future, before markets are vulnerable to collapse.”
The initiative will take an interdisciplinary approach to the issues at hand. A group of lawyers and social scientists will use case studies drawn from the financial crisis to analyze deficiencies in established legal, economic, and sociological theories.
The Law School’s center is among approximately 30 grantees to be awarded funding during the inaugural grant cycle, out of more than 500 proposals submitted.
# # #
Columbia Law School, founded in 1858, stands at the forefront of legal education and of the law in a global society. Columbia Law School joins its traditional strengths in international and comparative law, constitutional law, administrative law, business law and human rights law with pioneering work in the areas of intellectual property, digital technology, sexuality and gender, criminal, national security, and environmental law.