Retrospectives
Regulating Banks versus Managing Liquidity: Jeremy Bentham and Henry Thornton in 1802
Bibliographic Data
| ID | 14855194 |
|---|---|
| Authors | John Berdell (John Berdell is Associate Professor of Economics, DePaul University, Chicago, Illinois.), Thomas H Mondschean (DePaul University), Thomas Mondschean (Thomas Mondschean is Professor of Economics, DePaul University, Chicago, Illinois.) |
| Year | 2020 |
| Volume | 34 |
| Issue | 4 |
| Pages | 195-209 |
| Publication date | 2020-11-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Journal of Economic Perspectives (JOURNAL) |
| Journal identifiers | ISSN: 0895-3309 • E-ISSN: 1944-7965 |
| Publisher | American Economic Association (PUBLISHER • US) |
| DOI | 10.1257/jep.34.4.195 |
| OpenAlex | W3095799932 |
| Language | EN |
| Citations received | 1 |
| References cited | 8 |
At nearly the same moment, Jeremy Bentham and Henry Thornton adopted diametrically opposed approaches to stabilizing the financial system. Henry Thornton eloquently defended the Bank of England’s actions as the lender of last resort and saw its discretionary management of liquidity as the key stabilizer of the credit system. In contrast, Jeremy Bentham advocated the imposition of strict bank regulations and examinations, without which, he predicted, Britain would soon experience a systemic crisis—which he called “universal bankruptcy.” There are strong parallels but also dramatic differences with our recent attempts to reduce systemic risk within financial systems. The Basel III bank regulatory framework effectively intertwines Bentham’s and Thornton’s diametrically opposed approaches to stabilizing banks. Yet Bentham’s and Thornton’s concerns regarding the stability of the wider financial system remain alive today due to financial innovation and the politics of responding to financial crises
Bankruptcy · Basel III · Business · Capital requirement · Central bank · Economics · Financial crisis · Financial system · Jeremy bentham · Keynesian economics · Law and economics · Lender of last resort · Market liquidity · Monetary policy · Neoclassical economics · Operations management · Parallels · Political science · Politics · Systemic risk · Banking stability, regulation, efficiency · Economic Theory and Policy · Global Financial Crisis and Policies · Law · Finance
| Citations per year | 1 |
|---|---|
| Citation span | 2025 - 2025 (1) |
| Highly cited | No |