Economics Working Paper WP12102
In this paper we examine and compare the problem of safety and soundness regulation in two industries that have dominated the headlines in recent years—nuclear power and financial services. In both industries, a major purpose of regulation and supervision is the prevention of excessive risk taking which can result in extraordinary harm to society. While clearly important industries in their own right, we hope a side-by-side comparison sheds light on the broader policy problem. One of the most striking differences in our comparison is that the recent safety record in the nuclear power industry in the United States appears to be better than the safety record in the financial sector, as evidenced most recently by the failure and bailout of several large financial firms and the resulting global financial crisis.