DP11846 | The End of Alchemy: A Review Essay

Author(s)

Publication Date

02/13/2017

JEL Code(s)

Keyword(s)

Programme Area(s)

Abstract

I review The End of Alchemy by Mervyn King, published by W.W. Norton and Company in 2016. I discuss King's proposed regulatory reform, the `Pawn Broker for All Seasons' (PFAS) and I compare it to an alternative solution developed in my own work. I argue that unregulated trade in the financial markets will not, in general, lead to Pareto optimal allocations. As a consequence, solutions like the PFAS that correct problems with existing institutions are likely to be circumvented by the development of new ones.