Governing Innovation

Recently, I asked my seminar students at Harvard Law School whether there were any circumstances under which they would say no to innovation. The class looked stunned and was silent. The student I was directly looking at when I put my question, quietly but decidedly shook his head. This happened in the spring of 2009, on a day when the Dow Jones Industrial Average fell by nearly 300 points, and the world was in severe recession as a result, in part, of ingenious but unregulated innovation in the financial market. At the heart of that story were innocent-seeming devices – with bland, opaque monikers like CDOs (collateralized debt obligations) – that many economists saw as a clever way for investors to take advantage of fluctuations in people’s debts, payment schedules, and interest rates.